Hot air is hissing out of this market.
Sales of new single-family houses in September plunged 18% from September a year ago, not-seasonally adjusted, to just 41,000 new single-family houses, according to estimates that the Census Bureau and the Department of Housing and Urban Development jointly reported this morning.
In terms of the seasonally adjusted annual rate of sales, which projects what sales for an entire 12-month period would be based on the sales in September: It plunged 13% from September last year to an annual rate of 553,000 houses. Single-family house sales account for about 10% of total home sales. This data is volatile and is subject to big adjustments, but after a while, the trends are starting to be unignorable:
But the number of new unsold single-family houses on the market keeps surging and in September jumped 16% from a year ago, to 331,000 houses (not seasonally adjusted), the highest number since January 2009, during the middle of the housing bust.
This supply of unsold new single-family houses on the market, at the rate of sales in September, represents 8.0 months’ supply, the highest since February 2011, and up 40% from September a year ago.
So, is it time to cut prices to move the unsold inventory languishing on the market? You bet.
In September the median sale price dropped, very embarrassingly, 3.5% from September last year, to $320,000. The median price is now down 6.8% from the glory days at the peak last November:
Homebuilders are pros. There are no emotions involved. They do this for a living. They have all sorts of data at their fingertips. They know how the market works, and where the market is headed, and they cannot sit on their unsold inventories for long, and they will sell what they have built, one way or the other, and if they have to cut prices and offer incentives, so be it.
By contrast, regular homeowners, trying to sell the home they’re living in, or used to live in, are often under all kinds of illusions about the market, and they have some aspirational price in mind that they want to get, and they’re still dreaming of bidding wars, and they take a lot longer to come to the realization that the market has turned, and that if they want to sell, they need to be where the market is.
And this data confirms that the hot air is coming out of the housing market, not all at once, but very gradually, with many up and downs in between.