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New-Home Sales Are Down—Even More Than We Had Thought

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In a report on new-home sales on Monday, the Commerce Department noted that numbers were down—and for the past few months, those numbers were worse than it had previously reported.

New-home sales declined 11.5% in September from August, according to the Commerce Department. That’s still 2% above September 2014, but since 2% is not statistically significant, it might as well be zero.

Plus, the department went back and revised its numbers for the summer—and those revisions were all negative, especially for July and August.

“Last year we picked up momentum in the late summer and fall,” Jonathan Smoke, our chief economist, said. “This year seems to be the opposite—we are losing momentum.”

The data indicate “the real issues that emerged late this summer in the new-home market,” Smoke said. “The new data for September and revisions to July and August question the supposedly strong growth signals that were previously interpreted by many.”

But what’s the reason? The median sale price is an important clue as to why growth seems to be stalling out, Smoke said. In September, the median sale price for a new home was $ 296,900, up 3% from August. It’s up 14% compared with last year.

That upward shift reflects the fact that few builders are offering affordable homes suited for first-time buyers, Smoke said. Meanwhile, the higher-end buyers have been affected by the stock market dips in August, as we’ve seen in the existing-home sales numbers.

Now that the stock market has calmed down, new-home sales could recover, but “there is a ceiling to how much growth we could see in the new-home market as long as builders can’t address the first-time buyer market,” Smoke warned.

And as we’ve said before, what helps first-time buyers achieve homeownership helps our economy as a whole.

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