January 2018 New Home Sales

Sales of new homes slowed in January 2018 according to the Census Bureau.  Signed contracts declined 7.8 percent to 593,000 units on an annualized basis.  However, December’s tally was revised upward to 643,000 units (originally 625,000).  This latest slowdown caused the year-over-year trend to fall into negative territory for the first time since August 2017. 

Price proxies moved lower while inventories rose.  The median-priced home set the buyer back $323,000, a decline of 4 percent from a month earlier.  Meanwhile, the average price declined more modestly, falling to $382,700 from $394,600 in December.  Both supply measures expanded in the period.  Builders added 6,000 new homes for a total of 299,000 units.  At the current pace of sales, this represents 6.1 months of supply, increasing from 5.5 months at the end of 2017 and just 4.9 months in November. 

New home sales have fallen for two consecutive months, but November was the best tally in the current expansion, so these recent setbacks are not alarming.  A growing new housing market directly impacts many areas of the economy so any deceleration could cause slowing in other areas of consumption.  For now, the deceleration is not very pronounced, but new home sales must be added to the list of slowing indicators.  Before this begins to sound too discouraging, let’s remember that America’s economy is dynamic and does not move in straight lines.  America’s current period of economic slowing might be followed a renewed acceleration.