New-Home Sales Remain at a High Level – Robert Hughes (10/28/2020)

Sales of new single-family homes declined slightly in September after rising to the fastest pace since December 2006 in the prior month. Total sales fell 3.5 percent in September to a 959,000 seasonally adjusted annual rate. Sales are still up an astonishing 32.1 percent from a year ago (see top chart).

Sales fell in three of the four regions tallied: sales fell 4.7 percent in the South – the largest region by sales volume – leaving sales 27.4 percent above year-ago levels while sales sank 28.9 percent in the Northeast, leaving that region’s sales rate 5.9 percent below the year-ago pace, and sales were down 4.1 percent in the Midwest (but still 34.8 percent above year-ago levels). However, sales were up 3.8 percent in the West and were 49.7 percent above the year-ago level.

Total inventory of new single-family homes for sale increased 0.7 percent to 284,000 in September, leaving the months’ supply (inventory times 12 divided by the annual selling rate) at 3.6, up 5.9 percent from August’s 3.4 months, and 32.1 percent below the year-ago level (see bottom chart).While the months’ supply did tick up slightly, the median time on the market for a new home declined to 4 months from 4.6 in August (see bottom chart).

Though unemployment remains high and the outlook for the labor market and the broader economy remains highly uncertain, near record-low mortgage rates and surging demand for less dense living areas are supporting a strong recovery for the housing market. Only time will tell if these conditions will continue, but for now the housing market remains one of the brightest areas of the economy.

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