Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  New Single-Family Home Sales Declined 8.9% in October
Posted Under: Data Watch • Government • Home Sales • Housing • Interest Rates

 

Implications:  There's no way to sugarcoat it, today's report on new home sales was disappointing all the way around.  Sales fell unexpectedly in October to the slowest pace since 2016, with every major region posting declines.  As a result, sales are now down 12% from a year ago.  Another sign of worry is the build-up in un-sold inventories which are up 17.5% in the past year.  This trend plus the recent slowing in the pace of sales has led to a rapid increase in the months' supply of homes which now sits at 7.4 months, up from 5.6 months a year ago and the highest reading since 2011 in the aftermath of the great recession.  Despite all of this we continue to believe that a rebound in the housing market is still on the horizon.  Why?  First, based on population the number of new home sales remains well below where it should be according to history.  Using the ratio of sales to the US population from 1995 for example, well before the beginning of the housing bubble, shows that new home sales should be at a pace of around 820,000 annualized.  That means that even a partial reversion to the mean bodes well for sales over the coming years.  Second, the labor market continues to strengthen and wages are rising which should underpin demand.  Finally, many analysts are pointing the finger at rising interest rates as the prime culprit behind slowing home sales but we do not believe rates at current levels or even higher will have a long-term detrimental effect.  The US has had strong periods of homes sales with much higher rates than exist today.  Household financial obligations are still hovering near the lowest share of disposable income since the early 1980s so an extra 100 basis points on a mortgage shouldn't be enough to keep buyers permanently out of the market.   On a final note, remember that new home sales data can be noisy as evidenced by the 44,000-upward revision to September's sales pace.  Looking forward, a similar upward revision to today's number is possible and we expect a rebound in sales later in the fourth quarter.   In other news this morning, the Richmond Fed index, which measures mid-Atlantic factory sentiment, fell to a still elevated 14 in November from 15 in October.  This signals continued optimism from the factory sector.

Click here for PDF version

Posted on Wednesday, November 28, 2018 @ 11:51 AM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
Home |  Important Legal Information |  Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2018 All rights reserved.