New home sales rise 3.1% in September while inventory tightens

Dive Brief:

New single-family home sales increased 3.1% between August and September to a seasonally adjusted annual rate of 593,000, the Commerce Department reported Wednesday. September’s rate was 29.8% higher than September 2015.
The median sales prices of homes sold in September was $313,500, compared to $284,000 in August. The report also found that there is a 4.8-month supply of new homes on the market, which has tightened significantly from 5.8 months a year ago.
The Northeast region saw the biggest monthly gains in September, increasing 33.3% after falling by about that much in August. The Midwest and South rose 8.8% and 3.4%, respectively, during the period, after posting modest declines in August. The West fell 4.5% after August’s 8.0% increase.

U.S. residential sales for September 2016 — U.S. Commerce Department

Dive Insight:

Uncertainty as to the direction of the housing market recovery’s continued in September. The Commerce Department revised August’s modest report from 609,000 to 575,000. Economists had initially predicted a drop to 602,000 single-family home sales for that month. Meanwhile, economists polled by MarketWatch had expected a slight decline again from August to September at 600,000 sales.

Wednesday’s figures suggest that the new construction activity reported in otherwise positive housing market reports earlier this month may not be enough to meet current demand. Shrinking inventory, which continued into September, continues to be a major concern for the industry.

Single-family housing starts increased 8.1% from August to September, and they’re 5.4% ahead of where they were in September 2015. Meanwhile, multifamily’s strong gains are beginning to ebb, as activity in that sector dropped 38.9% month-over-month in September and is down 42.5% from a year ago. Some economists say that the dropoff in multifamily is due to more first-time buyers entering the housing market.

September’s existing-home sales report from the National Association of Realtors offers evidence to support that claim, with first-timers driving the category’s 3.2% increase from August to September by taking a 34% share of sales — its biggest in more than four years.

Builders are confident that pent up demand from younger, would-be homeowners spending longer than previous generations as renters, and the potential for existing homeowners to trade up to new properties, has created a full pipeline that will generate demand in the coming years. The National Association of Home Builders/Wells Fargo Housing Market Index fell two points off its highest point in nearly a year in October, reading at 62 for the month and 72 for six-month sales expectations.

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