Contracts for new home sales expanded by 18.9% in September to a 667,000 seasonally adjusted annual rate, according to estimates from the joint data release of HUD and the Census Bureau. The solid reading in September returns new home sales to the positive growth trend it has been on for several years. This expansion is supported by ongoing job growth and improving household formations, as well as tight existing home inventory.
Despite some volatility in the month-to-month sales figures, September marks the fifth month in 2017 at an annual sales pace of more than 600,000. New home sales through September are running 8.6% higher than this time in 2016, in line with NAHB’s forecast.
Inventory held steady in September at 279,000 homes for sale. The current months’ supply stands at a healthy level of 5. Given tight existing inventory, more new homes are required to meet housing demand.
The most recent data also indicate a growing share of homes not-yet-started in builder inventory. For example, on a year-over-year basis, homes under construction in inventory have increased by 15% over the last year. Completed, ready-to-occupy homes (there are only 62,000) are up only 5% since September 2016. In contrast, homes not-yet-started listed in inventory have increased 24%. Sales of homes not-started construction have also been rising, increasing to a 236,000 seasonally adjusted annual rate in September. These factors are consistent with positive housing demand.
Pricing increased in September. Median new home sales price (price of the home in the middle of the distribution) rose to $319,700. Average home price jumped to $385,200. Managing rising construction costs in the months ahead will be a key challenge for housing affordability, as input costs increase.
Regionally, there was sales growth in all regions. On a year-to-date basis, home sales are up 28% in the Northeast, up 12% in the West, 6% higher in the South, and up 4% in the Midwest compared to this time in 2016.