New Single-Household Dwelling Gross sales Bounce in August, however Headwinds Intensify

Gross sales of latest single-family properties bounced larger in August, leaping 28.8 p.c to 685,000 at a seasonally-adjusted annual fee from a 532,000 tempo in July. The August achieve was solely the second enhance within the final eight months, leaving gross sales down 18.4 p.c from the December 2021 degree and 33.9 p.c from the August 2020 post-recession peak. August gross sales are near the 50-year common promoting fee (see first chart).

Nonetheless, the stunning result’s unlikely to be sustained within the coming months. The Nationwide Affiliation of Dwelling Builders’ Housing Market Index, a measure of homebuilder sentiment, fell once more in September, coming in at 46 versus 49 in August. That’s the ninth drop and the second month beneath the impartial 50 threshold. The index is down sharply from latest highs of 84 in December 2021 and 90 in November 2020.

In response to the report, “In one other signal that the slowdown within the housing market continues, builder sentiment fell for the ninth straight month in September as the mixture of elevated rates of interest, persistent constructing materials provide chain disruptions and excessive dwelling costs proceed to take a toll on affordability.”  The report provides, “In one other indicator of a weakening market, 24% of builders reported decreasing dwelling costs, up from 19% final month. Builder sentiment has declined each month in 2022. Attributable to tightening financial coverage, mortgage charges elevated above 6% final week, the best degree since 2008, which is pricing consumers out of the market. On this mushy market, greater than half of the builders in our survey reported utilizing incentives to bolster gross sales, together with mortgage fee buydowns, free facilities and value reductions.”

All three parts of the Housing Market Index fell once more in August. The anticipated single-family gross sales index dropped to 46 from 47 within the prior month, the present single-family gross sales index was right down to 54 from 57 in August, and the visitors of potential consumers index sank once more, hitting 31 from 32 within the prior month.

In August, gross sales of latest single-family properties had been up in all 4 areas. Gross sales within the Northeast, the smallest area by quantity, rose 66.7 p.c, gross sales within the South, the biggest by quantity, rose 29.4 p.c, gross sales within the West elevated 27.5 p.c, and gross sales within the Midwest rose 16.7 p.c for the month. During the last 12 months, gross sales had been down in two of the 4 areas, led by a 24.0 p.c fall within the West whereas gross sales had been off by 21.9 p.c within the Northeast. Positive factors from a 12 months in the past had been seen within the South (10.4 p.c) and within the Midwest (5.0 p.c).

The median gross sales value of a brand new single-family dwelling was $436,800 (see second chart), down from $466,300 in July (not seasonally adjusted), placing the 12-month common value at a file excessive $435,000 (see second chart). In the meantime, 30-year fastened fee mortgages had been 6.29 p.c in late September (and round 5.13 p.c in late August), up sharply from a low of two.65 p.c in January 2021. The mixture of excessive costs and rising mortgage charges reduces affordability and squeezes consumers out of the market.

The whole stock of latest single-family properties on the market rose 0.4 p.c to 461,000 in August, the best since March 2008. That places the months’ provide (stock occasions 12 divided by the annual promoting fee) at 8.1, down 22.1 p.c from July, however 24.6 p.c above the year-ago degree. Stock and the months’ provide stay very excessive by historic comparability (see third chart). The excessive degree of costs, elevated stock, and surge in mortgage charges ought to proceed to weigh on housing exercise within the coming months and quarters. Nonetheless, the median time available on the market for a brand new dwelling remained very low in August, coming in at 1.7 months versus 2.4 in July.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 following greater than 25 years in financial and monetary markets analysis on Wall Avenue. Bob was previously the pinnacle of International Fairness Technique for Brown Brothers Harriman, the place he developed fairness funding technique combining top-down macro evaluation with bottom-up fundamentals.

Previous to BBH, Bob was a Senior Fairness Strategist for State Avenue International Markets, Senior Financial Strategist with Prudential Fairness Group and Senior Economist and Monetary Markets Analyst for Citicorp Funding Companies. Bob has a MA in economics from Fordham College and a BS in enterprise from Lehigh College.

Get notified of latest articles from Robert Hughes and AIER.