Economist's Insights

New Home Sales Slumped, Adding to Concerns of Housing Slowdown

Jul 26, 2018

New home sales slumped a sharper-than-expected 5.3% in June to their slowest pace in eight months. Total annualized sales slipped to 631k units compared to estimates for a smaller decline to 668k. Adding to the disappointment, the combined tally from the prior three months was revised down 27k units and the YoY gain of 1.8% was the weakest since August 2017. Activity firmed in the Northeast, the smallest region by volume, while contract signings in the three other regions slowed: listed high to low by volume, South -7.7%, West -5.2%, and Midwest -13.4%. Unlike the trends in the existing home sales from earlier in the week, both the median and average price ticked down. The median price fell for a third month in a row to $302,100, the lowest since February 2017 as lower priced homes continued to account for a larger share of total sales.

Homes with a price tag greater than $400k accounted for 27.6% of total sales, the lowest share since October 2016, while homes between $150k to $299k accounted for 46.6%, the highest since February 2017. Supply-side metrics showed a cycle-high of 301k new homes were in inventory at the end of June, which when combined with the slower sales pace, pushed months’ supply up to 5.7, the highest since last August. After the June report, the general uptrend for new home sales that persisted from 2011 to 2017 appears to have leveled out, compounding the effects of weaker existing sales in stirring concerns of a housing slowdown.