Sales down, but still higher than last year
It looks like builders have their work cut out for them to spur buyers off the fence.
New, single-family home sales fell 3.4 percent in August from July, according to a joint release from the U.S. Census Bureau and the Department of Housing and Urban Development.
August’s sales pace marked the lowest sales reading since December 2016.
Year-to-date sales, however, are 7.5 percent above the reading over the same period last year.
Several causes of falling home sales
While home sales typically slow down near the end of the year, high prices are the main culprit. Hurricanes Harvey and Irma didn’t help matters either.
Disaster areas in Florida and Texas account for 14% of single-family construction in the country, according to the Census Bureau.
“The year-to-date growth shows that new home sales are continuing to make consistent, long-term gains,” says Robert Dietz, chief economist with the National Association of Home Builders.
High prices, lack of affordable options
Median sales prices of new homes continue to fall this year since topping out at $327,100 in December 2016.
Buyers got even more of a reprieve in August as the median price dropped to $300,200 from $319,900 in July.
Battered by rising prices and fewer starter-home choices, buyers feel stretched.
Builders need to adjust their game plans to build smaller, less expensive new homes. This helps satisfy buyer demand and keeps inventory moving.
“New homes will need to be competitively priced, even as inventory for existing homes remains weak,” Dietz says.
“For this reason, we continue to expect a broadening of the new-home inventory base and slight declines in median new home size.”
Consumer confidence faltering
Consumers’ optimism fizzled in September — especially in the areas where the storms hit hardest.
The Consumer Confidence Index fell to a reading of 119.8 in September, down from 120.4 in August, according to The Conference Board.
When consumers are concerned about the economy, or their income or job prospects, they tend to spend less.
It’s important to watch these readings, because they have ripple effects on consumers’ big-ticket purchases.
And they’re not the only ones who are skittish.
Builder confidence fell three points in September on the monthly National Association of Home Builders/Wells Fargo Housing Market Index, or HMI.
Repeat buyers in prime position to buy new
So who wins in the new-home market? The answer: current homeowners who want to move up into new construction.
You’ll be more likely to find the amenities and location you want more easily in a new home than a resale.
And it’s clear that builders are wooing buyers by dropping sales prices. That puts the ball in your court.
A real estate agent can help you determine your current home’s market value so you can figure out how much of a new home you can afford.
Another bonus: low mortgage rates.
August’s dismal sales numbers drove the 10-year Treasury yield down one basis point to 2.24 percent. In turn, mortgage rates fell, too.
That’s great news if you want to buy or refinance, because mortgage rates tend to follow Treasury yields.
What are today’s mortgage rates?
Current mortgage rates remain at highly-affordable levels. However, we might see mortgage rates go up if the Fed raises rates later this year.
Securing a rate lock for a new home now could help you save money in the long run.