Washington, D.C. — Sales of newly built, single-family homes rose 3.5 percent in August to a seasonally adjusted annual rate of 629,000 units after downwardly revised June and July reports, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. These downward revisions suggest softness in new home sales activity this summer. However, on a year-to-date basis, sales are up 6.9 percent from this time in 2017.
“New home sales have ticked up in August, due to positive demographics and a strong overall economy,” said Randy Noel, chairman of the National Association of Home Builders (NAHB) and a custom home builder from LaPlace, La. “However, housing affordability remains a serious concern and builders must manage supply-side costs and stiff regulatory hurdles to keep prices competitive.”
“Housing affordability has taken a toll on new home sales over the summer, and there could be market volatility in the months ahead as communities grapple with the aftereffects of Hurricane Florence,” said NAHB Chief Economist Robert Dietz. “Still, we expect the overall housing market to grow this year as demand continues to increase among millennials and other newcomers.”
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the August reading of 629,000 units is the number of homes that would sell if this pace continued for the next 12 months.
The inventory of new homes for sale was 318,000 in August. The median sales price was $320,200.
Regionally, new home sales rose 47.8 percent in the Northeast, 9.1 percent in the West and 2.7 percent in the Midwest. Sales fell 1.7 percent in the South.
Total housing starts increased 9.2 percent in August to a seasonally adjusted annual rate of 1.28 million units, according to data from the U.S. Department of Housing and Urban Development and the Commerce Department.
The August reading of 1.28 million is the number of housing units builders would start if they maintained this pace for the next 12 months. Within this overall number, single-family starts increased 1.9 percent to 876,000 units. Meanwhile, the multifamily sector — which includes apartment buildings and condos — increased 29.3 percent to a total of 408,000.
“Builders remain largely confident because the economy is solid and demographics point to continued demand,” said NAHB Chairman Noel. “However, affordability continues to be a concern for both builders and buyers.”
While housing production rose, overall permits — which are an indicator of future housing production — dropped 5.7 percent to 1.23 million units in August. Single-family permits fell 6.1 percent to 820,000 units, and multifamily permits dropped 4.9 percent to 409,000 units.
“Although we saw an increase in starts in August, we are likely to see softening in the market in the months ahead,” said NAHB’s Dietz. “Affordability is a particular concern because of home price gains, due in part to the high regulatory burden on new home construction. Increasing costs for building materials prompted partially by recently imposed tariffs on a wide range of products are also a concern. Moreover, interest rates are continuing their gradual upward climb.”
“After several lackluster months, the headline number for August starts is strong,” said Scott Volling, principal, PwC. “However, breaking down the number further shows the entire year-over-year gain can be attributed to multifamily, while single family actually decreased year over year. This continues an overall disappointing three-month trend in starts.
“Permits in June and July provided a bit of a promising silver lining, but in August permits came in at the lowest levels since May 2017, Volling said. “With mortgage rates at a seven-year high, homebuilder sentiment trending lower, and an increased threat of tariffs further pressuring existing affordability challenges, the ho-hum results of August could very well be the norm for the foreseeable future.”
Regionally, the West led the nation with a 19.1 percent increase in combined single-family and multifamily housing starts. Unchanged in the Northeast, starts increased 9.1 percent in the Midwest and 6.5 percent in the South.
Led by a 19.2 percent decline in the Northeast, permits decreased in every region. They were down 1.7 percent in the Midwest, 2.9 percent in the South and 8.4 percent in the West.