Sales of New Homes Plummeted in July, Led by Northeast

Andrew Cummings
August 24, 2017

New home sales in the South also fell by 4.1% during the month, while new home sales in the Midwest climbed by 6.2%.

New home sales, which account for about 10 percent of overall housing sales, tend to be volatile from month to month. Home sales in May also were not as weak as previously reported, taking some of the sting from July's report. "With the labour market strong, the biggest threat to the new homes market right now is the tightening of mortgage lending standards in recent months, though we don't expect that to continue".

Figures from the Commerce Department showed new home sales fell 9.4% from June's revised rate of 630,000, versus expectations for a smaller decline to 612,000. This was the lowest sales reading since December 2016. Analysts now estimate sales will hold lower than the 25-year average, which is 727,000 annually. Despite the decline, year-to-date sales are 9.2% above their level in the first seven months of 2016. Since sales fell, the increase in the median sales price likely reflect changes in the composition of new homes sold. "New home prices are significantly outpacing existing home prices". "Until builders switch their efforts to cheaper starter homes, that will limit the degree to which sales can grow". Still, new housing stock is less than half of what it was at its zenith during the housing bubble.

Of course, existing home supply is down, too, so that helps to push up demand on newly built homes, which moved to almost 6 months of supply in July.

At July's sales pace it would take 5.8 months to clear the supply of houses on the market, nearly a two-year high and up from 5.2 months in June.

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