New Home Sales Slump Continues

This year's slump in new home sales extended into October. Sales in the month came in far below expectations at a 544,000 annualized rate in a disappointment offset in part by a net 50,000 upward revision to the two prior months.

Yet sales of new homes have clearly been moving lower, hitting a peak of 712,000 in November last year and largely declining since. Year-on-year, new home sales are down 12.0 percent in today's report in what is bad news for the nation's Realtors and home builders.

More bad news comes from prices where the median, at $309,700, fell 3.6 percent in October for a year-on-year decline of 3.1 percent. This is still far short of the decline in sales and hints at further price erosion ahead.

Supply, at 336,000 units, did come into the market during the month but didn't appear to help sales. And given the sharp decline in October sales, supply relative to sales suddenly hints at a glut, jumping to 7.4 months vs 6.5 in September and 5.6 in October last year.

October sales in the South fell 7.7 percent and may reflect effects from Hurricane Michael which hit Florida and Georgia at mid-month. Yet the month's declines in both the Midwest and Northeast were even more severe with sales in the West, a focused region for new homes, also falling.

Housing is by far the biggest disappointment of the 2018 economy and based on this report not to mention the climb in mortgage rates, the sector doesn't look to be finishing the year in a rally.