New home sales decreased in July, revealing a relatively static market, according to the new report from the Census Bureau and the Department of Housing and Urban Development.
Zillow Senior Economist Aaron Terrazas said that home sales once again disappointed expectations, indicating that the market is in trouble.
“For the second month in a row, both new and existing home sales have come in below expectations, adding yet another data point to the mounting body of evidence pointing to a struggling housing market.” Sales of new single-family houses decreased 1.7% to 627,000 in July, down from June’s 638,000 sales but is 12.8% above the estimate of 556,000 sales in June last year.
Terrazas said the market has remained underwhelming, only showing signs of life as home prices increase.
“The only housing market indicator that has moved decisively higher in 2018 has been prices: Everything else is flat,” Terrazas said.
“Whatever progress has been made in new home sales since the economic recovery began, recent data makes it clear that builders have been struggling to ramp up new single-family home construction for years.” The median sales price of new homes sold increased to $328,700, and the average sales price was $394,300.
The seasonally adjusted estimate of new homes for sale by the end of the month increased to 309,000 in July, representing a supply of 5.9 months at the current sales rate.
Although there is an expected uptick in new homes to be sold by the end of July, Terrazas believes the slow pace of homebuilding has ultimately offset homebuyer demand.
“If building levels had largely stayed near their historic norms and had kept pace with population growth, there would be millions more single-family homes nationwide, and the current imbalance between housing supply and housing demand would not be nearly pronounced,” Terrazas said.
This might be a hard pill to swallow, but Terrazas said that "a few months of incremental gains or losses will not meaningfully change this difficult fact."