The numbers: Sales of newly built homes took place at a seasonally adjusted annual rate of 841,000 in November, the Census Bureau reported on Wednesday. This was 11% below the revised downward rate of 945,000 in October.
MarketWatch analysts had forecast new home sales at a seasonally adjusted annual rate of 875,000. Compared to last year, however, the number in November remained high, increasing by almost 21% over the year.
What happened: New home sales fell in all parts of the country, driven by a 43% drop in the Midwest.
The inventory increased significantly at the end of the month, increasing by about 14% to an offer of 4.1 months. The six-month supply of housing is generally considered indicative of a balanced market. The average price of new homes for sale was 335,300 USD, down from October, but up 5% from last year.
The whole picture: The drop in sales in November is a sign that buyers are cooling in the market, in tandem with the colder weather. “While buyers continue to favor larger homes with larger yards and a better quality of life, the sharp rise in prices makes a difference between their preferences and their wallets,” said George Ratiu, senior economist at Realtor.com .
Indeed, the rising cost of new homes indicates the challenges buyers will face as we move into the new year. The increase in sales prices for newly built homes is mainly a reflection of the higher costs of the building. However, given that the supply of existing homes is so limited, buyers will face stiff competition for most properties as prices rise.
Builders will face a challenge in 2021: there is a high demand for more affordable homes, but those homes offer a lower profit for construction companies. “New home builders need to navigate the rising construction costs and change consumer preferences to increase the availability of new homes at affordable prices,” said Ratiu.
What are they saying: “Stocks are down – down 14.2% year-on-year in October – and could be a constraint on future home sales,” Rubeela Farooqi, chief economist at High Frequency Economics, said in a statement. research note.
Market reaction: Market reaction: DJIA Dow Jones Industrial Average,
and S&P SPX,
Before Wednesday, despite confusion over the fate of the latest stimulus package.
Meanwhile, the shares of the construction companies PulteGroup PHM,
LGI LGIH Case,
and Lennar Corp. LEN,
all fell by 2% following the launch of the new home sales report.