What’s Putting a Damper on New Home Sales?

According to a new report by Redfin, sales of new single-family homes fell 8 percent year over year in January for the fifth consecutive month recording year-over-year declines in new home sales. However,  the size of the drop was smaller than in December in all regions except the West, where sales fell by more in January than they did the month before.

Region-specific data, on a seasonally adjusted basis, revealed a decline in year over year change in new home sales in November 2018 at -0.3 percent in Midwest, -12.6 percent in Northeast, -2.6 percent in South and, -8.1 percent in the West. Nationally, a decline of 4.2 percent was recorded in Nov. 2018. December 2018 recorded a -13.1 percent decline in Midwest, followed by Northeast, South, and West at -17 percent, -11.8 percent, and -13.2 percent respectively. Nationally, December recorded a decline at 12.6 percent in the annual change in sale of new homes whereas, in January 2019, the numbers shrank reflecting a drop in declines at -8 percent.

“The shrinking size of sales declines, paired with falling interest rates, may be helping to improve builder confidence, which has been on the rise since December,” said Daryl Fairweather, Chief Economist at Redfin. Fairweather also noted that buyers have become more sensitive to high home prices and understand that the market is shifting in their favor. “That added sensitivity could continue to put a damper on the sales of new homes, which tend to be more expensive than comparable existing ones,” she said. 

The nationwide median sale price for new homes in January 2019 is $339,000 with a year over year change in median sale price at 1.2 percent. The annual change in the inventory of new homes is at 0.2 percent, according to Redfin data. 

Read the full report here.