November saw a shocking downturn as newly released data disclosed the lowest new home sales in a year, defying expectations. This development has raised concerns within the real estate market.
Deciphering the Unexpected 12.2% Decline in a Market Forecasted for Growth
The report discloses that, according to Census data, new homes were sold at a seasonally adjusted annual rate of 590,000 last month. This figure represents a surprising 12.2% decline from October’s revised rate. Despite sales being only slightly higher than last year’s figures, the results managed to catch analysts by surprise. FactSet’s projected increase to 688,000 annually left experts puzzled as the actual numbers differed from expectations.
The Midwest experienced robust sales growth, marked by a 25% increase in contract signings from the previous month. Additionally, the data revealed an impressive 52% surge compared to November 2022. Meanwhile, Southern states saw a 21% drop-off from October and an 8.4% decline from the previous year. Despite this, they continue to represent over half of the total sales.
Impact of Mortgage Rates
Surprisingly, sales declined even as mortgage rates pulled away from multi-decade highs. Mortgage rates fell throughout November from a peak of 7.79% in October but remained above 7% through the end of the month, according to Freddie Mac.
Decoding Contradictions in the New Home Sales Market
Early data interpretation may explain the paradox, with potential revisions in the coming months contributing to this apparent discrepancy. Alternatively, it might indicate a shift in buyer mentality, as potential homebuyers delay plans, anticipating further declines in mortgage rates. The industry closely watches these trends as experts see them signaling potential shifts in the dynamics of the new home sales market.
November’s 12.2% decline in new home sales, contrary to expectations, sparks concerns in the real estate market. Regional disparities, unexpected shifts, and the impact of mortgage rates add complexity, warranting vigilant industry scrutiny, said WSJ Print Subscription.