Sales were down in the South, the West, and Northeast, so don’t blame the hurricanes.
Economists Surprised Again
Economists were surprised by another month of weak new home sales.
The Econoday consensus estimate was 583,000 at a seasonally adjusted annualized rate (SAAR) but sales came in at 560,000 SAAR.
Weakness in the South pulled down new home sales in August as it did in last week’s existing home sales report. New home sales fell sharply in the month to a 560,000 annualized rate vs an upward revised rate of 580,000 in July and a downward revised 614,000 in June (revisions total a net minus 7,000).
Sales in the South, which is by far the largest region for housing, fell 4.7 percent in the month to a 307,000 rate for a year-on-year decline of 9.2 percent. But importantly, sales in the West and Northeast were also lower, down 2.6 and 2.7 percent respectively, with sales in the Midwest unchanged.
September, in fact, was a weak month for housing demand, evident in this report’s median price which fell a very sharp 6.2 percent to $300,200. Year-on-year, the median is up only 0.4 percent which, in another negative, is still ahead of sales where the yearly rate is minus 1.2 percent.
Builders, despite late month disruptions in the South, moved houses into the market, up 12,000 to 284,000 for a striking 17.8 percent yearly gain that hints at a glut. But supply had been so thin that the balance is now at a traditional level, at 6.1 months vs 5.7 and 5.3 months in the prior two months and 5.1 months a year ago.
Hurricane effects are likely in the next report for September with the South to continue to suffer. But today’s data do mark a shift, one of softening sales nationally, which is a short-term weakness, and a rebalancing in supply which is a long-term strength. Yet for the 2017 economy, the housing sector looks to be ending the year in weakness, some of it hurricane-related.
Expect downward revisions in GDP estimates for the third and fourth quarters.
Mike “Mish” Shedlock