Sales of newly built homes fell much lower than expected in November, and builders’ stocks are not doing well. Shares of big names such as Lennar, Pulte, DR Horton and Toll Brothers fell more than 2% on the news.
New home sales fell 11 percent faster than expected in November-October, according to the US Census.
The October reading was also revised below. Sales reached an annualized rate of 841,000, down from a peak of 979,000 in July. These numbers are based on signed contracts, not agreements. Sales increased by 20.8% year-on-year.
The withdrawal may be due to prices, which have risen steadily. The average price of a newly built house increased by 2.2% compared to November 2019, to 335,300 USD.
“As a sign that accessibility will remain a major challenge, sales of basic homes – at prices below $ 200,000 – accounted for only 2% of total sales,” said George Ratiu, senior economist at realtor.com. “These figures reflected the slowdown in the economy, rising unemployment and the growing challenge of accessibility, which has hampered activity despite low mortgage rates.”
Mortgage rates fell dramatically in November, when these sales were signed. This gave buyers more purchasing power, but probably also helped raise prices for the same reason.
“I have to wonder if aggressive home price gains are starting to impact that buyer for the first time. It was Toll Brothers who used the term ‘sticker shock’ for some when they reported earnings a few weeks ago,” he said. Peter Boockvar, Investment Director at Bleakley Advisory Group.