New home sales fell for October from 3.95mn to 3.79mn (representing a drop of 5.56%) which is less than economist expectations of 3.9mn. The median home price dropped but to a much greater degree demonstrating a 17.6% YoY fall to $409,300, the largest percentage decline since 1964. Furthermore, the supply of existing housing is 50% lower than its pre-pandemic levels.
This all suggests that despite mortgage rates falling and a lack of existing housing supply on the market, there is nothing left to blame apart from buyers just not wanting to buy a house at the moment. This can likely be attributed to expectations of falling prices in the future, thus, causing many to postpone their purchases until the market cools down more. This is somewhat conflicting with the CSI released this week which showed an improving economic outlook, however, what the report did mention is that 2/3rds of respondents are expecting a recession in the next year….
Going forward, we will likely see an increase in construction spending, building permits and housing completions due to the lack of existing homes on the market – however, it may not be at high levels as ultimately, this is not a buyer, nor seller's market and therefore, certainty of selling a newly constructed house is greatly dented and likely reducing the incentive to build in the first place.
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