New Home Sales Weaker Than Expected

Housing data, especially for new home sales, can be very volatile and unfortunately for the assessment of the housing sector, the volatility in the September report is sharply downward. New home sales fell 5.5 percent last month to a much weaker-than-expected annualized pace of 553,000 which is far below Econoday's consensus range. Revisions are also negative with August now at 585,000, down 44,000 from the initial reading with July revised 5,000 lower.

A lack of available new homes has been holding sales down this year though supply did move into the market in September, up 2.8 percent to 327,000 for a very strong 16.8 percent year-on-year gain that underscores how busy home builders have been. But relative to sales, given how weak they now have turned, supply is suddenly over 7 months at 7.1 vs 6.5 months in August and 5.3 months in September last year.

Prices were flat in the month, up 0.3 percent to a median $320,000. Yet this may be rich relative to sales as the year-on-year slippage in the median, at minus 3.5 percent, is well below sales which are at minus 13.2 percent.

Regional sales data include a 12.0 percent drop in the West where year-on-year sales are at minus 15.8 percent. The Midwest is doing the best, up 6.9 percent in the month for a yearly gain of 4.1 percent.

Buyer blahs in the housing sector is one of the chief and unwanted features of the 2018 economy. Rising mortgage rates, now over 5 percent for 30-year fixed loans, aren't helping though the strength of the jobs and stock markets should be pluses. September's showing is lowest rate since July last year and follows last week's disappointing results for existing home sales. Watch tomorrow for the pending home sales index where expectations are already very soft.