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First Cut: September new home sales dip month-over-month, but year-over-year jumps

Sales of new single-family homes dipped 0.7% in September to 701,000, a decline that was not significant and left the level still among the best readings for 2019 to-date. Moreover, the level jumped 15.5% compared to the 607,000 units sold in September 2018.

Sales were down in three of four regions, although the 0.2% decline in the South was hardly worth noting. Sales in the Northeast were off 2.8% and the West had a 3.8% decline.  Again, these did not represent any substantial change of pace. Sales in the Midwest were up 6.3%, an increase that seems to be in line with normal month-to-month variation recently.

The supply of new homes was unchanged at 5.5 months’ worth in September from August, but remained narrow generally and was much tighter than the 6.4 months a year-ago.

Some of the robust activity in the new home market can be attributed to strong sales for lower-priced units. In September, the unadjusted total of units sold was 54,000 and split evenly between units in the $299,999 and below range and $300,000 and above. In August, it was 25 units in the lower price range and 32 in higher units.

Limited supplies of homes have driven some buyers who might traditionally look at existing homes into the new home market. Builders have responded with more units that are smaller and more appealing to entry-level buyers or those who are trading down. In September, 31.7% of buyers opted for units not yet started as compared to 28.3% in August. For units under construction, September’s buyers opted for 33.7% of the total as compared to 31.4% in the prior month. With fewer completed units on the market since pre-sales are strong, a 34.7% share of buyers went for these as opposed to 40.2% in August. Some buyers may also be committing to a contract now to lock in an attractive mortgage interest rate and be willing to wait for completion.

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