After an underwhelming existing home sales report last week set an ominous tone for the start of 2018, the real estate industry was hoping and expecting some good news from January’s new home sales data from the U.S. Census Bureau.
It didn’t get it. New home sales took a tumble for the second month in a row, falling 7.8 percent from December to a seasonally adjusted annual rate of 593,000 units. Year-over-year it was a more modest decline, falling by 1 percent.
The report comes on the heels of lackluster existing home sales for January, which saw a 3.2 percent drop month-over-month and 4.8 percent drop year-over-year.
“This report is undoubtedly disappointing,” wrote Aaron Terrazas, an economist with Zillow. “It seems clear that we shouldn’t expect a big breakthrough in new home sales any time soon, and should instead look for incremental progress at best. At this point, we’ll take whatever we can get.”
The nationwide drop was largely driven by a huge drop in the Northeast, which fell to a seasonally adjusted annual rate of 24,000 units, a whopping 33.3 percent decline. A similar drop occurred in the South (14.2 percent), which sees by far the largest amount of new home sales on any given month. For January, it was 301,000 units.
The declines in the Northeast and South offset a jump in new home sales in the Midwest, which reached a seasonally adjusted annual rate of 75,000 units, a 15.4 percent increase from the month before. The West saw a 1 percent rise as well.
The January data compared to a year ago show a similar story, although less concerning at just a 1 percent drop nationwide. That was caused again by a huge decline in the Northeast, which fell 44.2 percent compared to January of last year. The South also fell compared to a year ago, by 10.9 percent.
And like the month-over-month data, the declines in the Northeast and South offset gains in the West and Midwest. The West rose 33.1 percent compared to a year ago, while the Midwest gained by 2.7 percent.
If there’s a bright spot in the report, it’s the number of new homes currently for sale. Low housing inventory is largely responsible for the affordable housing crisis in the United States right, but new homes for sale steadily rose throughout 2017.
For January, inventory was at a seasonally adjust annual rate of 301,000, a 2.4 increase from a month ago and a 15.3 percent increase from a year ago. This in encouraging as the opposite trend is happening with existing home inventory.