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New Home Sales on a ‘Slow, Steady Upward Trend’

The latest U.S. Census/Department of Housing and Urban Development report [1] on new home sales figures in October shows that new home sales, while down 2 percent from September, are up 18 percent since a year ago.

Sales of new single-family houses in October, according to the report, were at a seasonally adjusted annual rate of 563,000. This made new sales about 11 percent of total U.S. sales.

October's annual pace of 563,000 for new home sales was “down slightly from September but continued the slow, steady upward trend of the last several years. Sales were down 1.9 percent from September but up 17.8 percent from last October. Builders cautiously added to available inventories. The inventory of new single family homes for sale was 246,000, the highest level since the downturn,” according to Robert Denk [2], AVP of forecasting and analysis with the National Association of Home Builders.

The median sales price of new houses sold in October was $304,500; the average sales price was $354,900. The estimate of new houses for sale at the end of October was 246,000, a supply of 5.2 months at the current sales rate.

David Berson, chief economist at Nationwide [3], said October’s dip was not a surprise, “given the slower pace of purchase mortgage applications in the Mortgage Bankers Association’s weekly survey [4] and a decrease in the current sales component in the NAHB/Wells Fargo Housing Market Index [5].”

Ralph McLaughlin, Trulia [6]’s chief economist, said that beyond the month-over-month totals of the HUD/Census report, a less volatile number to look at is the 12-month rolling total, which is up 13 percent, year-over-year, and represents the best one-year span since August 2008.

“The 12-month rolling total of new homes sales was the best in over eight years and boosts sales to 85 percent of the 50-year norm,” McLaughlin said. “New homes are helping satisfy homebuyers constrained by low resale inventory, but sales have room to grow.”

Berson said that the large millennial generation is expected to provide further demand for single-family housing as older millennials form families at an increasing rate.

“Historically, there is a significant uptick in homeownership at the age of 35,” he said, “an age that the oldest millennials are reaching now.”

McLaughlin is holding most of his predictions to see how the market will fare4 under the coming Trump administration. He did say, however, that a renewed sense of buyer confidence in the South could yield stronger buying and building numbers over the next year.