Home sales lose momentum despite falling prices
Wednesday, October 30, 2019
Housing activity in September softened across the board and across the country. Low mortgage rates and reductions in home prices were not enough to offset a shortage of more affordable properties.
Sales of both new and existing homes slid from the previous month. New home starts and completions dropped substantially. While inventory of existing homes remained stable, those at lower price points were harder to find.
Having rebounded in August, new home sales dipped slightly in September, by less than 1%. The median price of a new home was $299,400, down nearly 8% from the previous month, and the average price was $362,700, down more than 10%. The earlier estimate of August’s sales was revised downward by around 1%. Nonetheless, sales were up 15.5% from September 2018.
Prices of existing homes rose to around 6% year over year, but the median price of those sold in September was down 2% from the previous month. Even so, existing home sales fell by 2.2%, following two months of positive growth.
Single-family home sales dropped by 2.7%. The median price of an existing single-family home sold was 2% lower than in August.
Demand for houses remains high, with both builders and real estate agents reporting increased foot traffic in September as would-be buyers are eager to take advantage of lower mortgage rates. Even with prices coming down somewhat, prospective buyers are having difficulty finding desirable properties at prices they can afford.
In general, higher-end sales are doing better at the moment. As inventories shrink, prices likely will begin to rise again, putting a damper on buying activity at a time of year that traditionally is slow for sales.
Adding to the pressure on sales is the erratic pace of new home construction. After soaring by more than 12% in August following several consecutive months of declines, new home starts in September plummeted by 9.4%. Requests for permits, too, were down by 2.7%. Completions, which grew by 2.4% the previous month, plunged by 9.7%.
Starts of single-family homes remained flat, and permits requests were up by less than 1%. Completions of single-family homes were down 8.6% compared to August. Dodge Data & Analytics reports that single-family construction fell 6% in September and is now off by 4% from a year ago.
Builders, however, remain confident that demand for new single-family homes in the coming months will improve, according to the National Association of Home Builders.
The association’s Housing Market Index (HMI) hit a 20-month high this month, with builders reporting increases in sales activity and buyer traffic. Expectations for activity in the next six months rose 6 points from September. Whether builders can keep pace with demand remains to be seen.
On the other side of the market, the National Association of Realtors announced pending home sales for September were up 1.5%, largely in the upper end of the market and in areas with more available inventory. What happens with home prices will determine whether October will see a gain in sales or a further slowdown in buyer activity.
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