When the Commerce Department reported last month that new home sales were lower in August than they had been all year, it came as a shock to many economists.
After all, in a survey of economists, Reuters had anticipated a 3.3% increase in new home sales. Instead, new home sales dropped 3.4%, strongly implying a slowdown in the housing market.
That followed a decline in July that came as a surprise on the heels of a gain in June. Economists surveyed by Reuters expect another decline Wednesday, from 560,000 in August to 555,000 in September.
Lynn Bell, director of new development for California-based Climb Real Estate, also expects to see a decline in September because of the severe weather in Texas and Florida.
“At Climb, we continue to see in many of the Bay Area counties high levels of demand with a low supply of new single-family home product,” Bell said. “Strong employment numbers and low interest rates continue to fuel the strong demand. New development housing prices will continue to rise particularly for development opportunities along major transportation hubs which provide access to employment centers for the millennials who are now starting families.”
“New home sales have been declining over the course of the year, despite strong demand and tight supply of housing,” observed Brian Davis, director of education for SparkRental.com. “Economists surveyed by Econoday estimate this trend will continue in the September report, forecasting an annual rate of 555,000 new home sales.”
John Engle, president of Illinois-based Almington Capital, expects the trend to continue as well.
“It's likely that new home sales will show a continued modest decline,” Engle said. “The weather events will have some impact, as the hurricanes hit two of the fastest-growing residential regions. Despite 2017 sales standing well above those at the same time last year, the underlying economic factors that have resulted in a dearth of supply in housing stock have yet to be addressed, and the slowdown in recent months could still reverse the year's trend.”
There have been some encouraging developments ahead of Wednesday’s report. Third-quarter home sales in New York, for instance, were just short of a record. In California’s Orange County, home prices set a record. But mostly the recent direction of home sales in states and cities has been downward.
Forecasts can be contradictory, though, and Davis noted that in pointing out that “Zillow expects a marginal rise of 0.1%, to 561,000,” which would be marginally higher than the year-low figure reported for August.
But last week the National Association of Realtors reported existing home sales went up 0.7%, the first increase in three months, and John Boyd Jr., principal of New Jersey-based The Boyd Co. Inc., took encouragement from that.
“There is a sense that builders are generally feeling positive about the economy,” Boyd said. “While I expect Hurricanes Irma and Harvey , affecting the high growth South Florida and Houston markets, to have some effect on this month’s data , there should be signs of growth in other parts of the country.”
The Commerce Department is scheduled to release its report on new home sales in September at 10 a.m. Eastern on Oct. 25.
