Real Estate News

New home sales drop even as prices fall

Published: 28 Sep 2017

Across the country, many Americans have found it difficult to buy a home simply because of a lack of available, affordable properties for sale. Starter homes and even trade-ups have been the subject of intense bidding wars for months now, but these issues seemed to come to a head in August, when new home sales dropped despite an increase in inventory and falling prices.

The seasonally adjusted sales rate for all newly built homes nationwide totaled just 560,000 in August, down 3.4 percent from the 580,000-unit revised rate observed in July, according to the latest data from the U.S. Census Bureau and the Department of Housing and Urban Development. That number also represented a 1.2 percent decline from the rate of 567,000 seen in August 2016.

Meanwhile, the median sales price for new homes dropped precipitously on a monthly basis, hitting just $300,200 in comparison with July's revised $319,900, the data showed. However, that price point was up on an annual basis, rising from $298,900. It's worth noting that these sales prices are down despite the fact that lower-priced homes are becoming more scarce; in August, only 14 percent of newly built homes were priced at less than $200,000, versus 18 percent a year earlier.

August saw mixed results for homebuyers, with fewer sales but lower prices.August saw mixed results for homebuyers, with fewer sales but lower prices.

A significant recovery
Across all homes for sale, prices in July - the latest month for which data was available - was up 5.9 percent on an annual basis and 0.7 percent from June, according to the latest S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index. That change brought the national median home price to 5.1 percent higher than the previous all-time peak seen in July 2006 and up 44.9 percent from its all-time trough set in February 2012.

"While home prices continue to rise, other housing indicators may be leveling off," said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. "Sales of both new and existing homes have slipped since last March. The housing market will face two contradicting challenges during the rest of 2017 and into 2018. First, rebuilding following hurricanes across Texas, Florida and other parts of the south will lead to further supply pressures. Second, the Fed's recent move to shrink its balance sheet could push mortgage rates upward."

Some homeowners left behind
Despite all those price increases since the recession came to an end, there are still significant inventory constrictions when it comes to existing homes, and experts believe a big part of this issue stems from just how hard some homeowners were hit by the downturn initially, according to CNBC. CoreLogic data shows that, nationwide, more than 700,000 owners are still dealing with home equity of less than 5 percent, so while things are moving in the right direction for many, it may still be some time until the inventory of homes for sale gets back to normal.

As would-be buyers approach today's market, they certainly need to keep inventory and pricing issues in mind. However, they should also note that prices and mortgage rates are both expected to continue rising through the end of the year and beyond, so acting as soon as possible could help them lock in deals that save tens of thousands of dollars over the lives of their mortgages.