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Sales of newly built homes were much weaker than expected for November, and builders’ stocks are not supporting it well. The stocks of the biggest names, such as Lennar, Pulte, DR Horton and Toll Brothers, fell more than 2% in the news.
New home sales fell 11% more than expected in November compared to October, according to the US census.
The October reading was also revised down. Sales reached an annualized rate of 841,000, down from a peak of 979,000 in July. These figures are based on signed contracts and not on closings. Sales increased 20.8% year over year.
The decline may be due to prices, which have increased steadily. The median price of a newly-built home increased 2.2% from November 2019 to $ 335,300.
“As a sign that affordability will remain a major challenge, sales of entry-level homes – priced below $ 200,000 – represented only 2% of total sales,” said George Ratiu, senior economist at realtor. com. “These numbers reflect the slowdown in the economy, rising jobless claims and the growing challenge of affordability, which have hampered activity despite historically low mortgage rates.”
Mortgage rates fell dramatically in November when those sales were signed. This gave buyers more purchasing power, but also likely contributed to the rise in prices for the same reason.
“I wonder if aggressive house price hikes are starting to impact this first-time buyer. It was after all Toll Brothers who used the term ‘sticker shock’ for some when they said earnings a few weeks ago, “said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
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