Existing Home Sales Remain Subdued, While New Sales Push Higher

Key Takeaways:

• Durable goods orders declined 0.8 percent for the second consecutive month in September, according to the Census Bureau. However, the decline was due to a large pullback in aircraft orders; excluding transportation, durable goods orders rose 0.4 percent. Core capital goods orders (nondefense excluding aircraft) increased 0.5 percent. Shipments of the same category, a good proxy for business fixed investment, declined 0.3 percent.
• Existing home sales declined 1.0 percent to a seasonally adjusted annualized rate (SAAR) of 3.84 million in September, the slowest sales pace since 2010, according to the National Association of REALTORS®. The number of homes available on the market increased 1.5 percent to 1.39 million, marking the ninth consecutive monthly increase in this measure. The months’ supply ticked up one-tenth to 4.3, above its 2019 average of 3.9.
• New single-family home sales rose 4.1 percent to a SAAR of 738,000 in September, the strongest pace since May 2023, according to the Census Bureau. The number of new homes available for sale remains elevated but increased just 0.4 percent in September, bringing the months’ supply down three-tenths to 7.6.

Forecast Impact:

Existing home sales were a bit below our expectations in September. Still, we had previously observed only a small pickup in mortgage applications as rates fell over the summer, so the subdued sales figure is in line with our thinking that there is a waning pool of potential homebuyers at current affordability levels. With mortgage rates now up more than 40 basis points since the end of September, we don’t expect a significant pickup in sales by the end of the year. However, the new home side remains a bright spot in the housing market. Considering revisions to previous months, the new sales figure was almost exactly in line with our forecast for the quarter. We view the current months’ supply of new homes for sale as sort of a goldilocks zone for continuing sales transactions; it’s high enough to encourage builders to continue to use incentives to move inventories but not so high that they’re likely to meaningfully slow construction. Still, we note that the October and November readings of both existing and new home sales are likely to be volaille given hurricane disruptions, and the recent move back up in mortgage rates could act as a headwind. Still, the outlook for new single-family starts and construction remains generally positive given a lack of existing inventories available for sale in many metros.

Nathaniel Drake
Economic and Strategic Research Group
October 25, 2024

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