New-home sales increased slightly in November — and 2020 looks set to be a big year for home builders

Published: Dec 23, 2019 10:27 a.m. ET

The small sample size of the new-home sales report from the U.S. Census Bureau lends itself to wide swings and significant revisions

New-home sales have picked up in 2019 as more people have shown interest in purchasing a newly-built property in the wake of the low supply of existing homes on the market.
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The numbers: Sales of newly-constructed homes in the U.S. increased 1.3% on a monthly basis in November to a seasonally-adjusted annual rate of 719,000, the government reported Monday.

While the November sales volume represented a monthly increase, that’s only because the data for October were revised. Previously, the government had said that new-home sales occurred at a 733,000 annual pace, which nearly met the 12-year record set back in June.

The small sample size of the new-home sales report from the U.S. Census Bureau lends itself to wide swings and significant revisions, as was also seen back in the September and October data releases.

November’s new-home sales volume was well below the MarketWatch consensus estimate of 740,000. Nevertheless, new-home sales were 19.4% higher on an annual basis in November.

What happened: The median sales price for new homes was $330,800 in November. The government estimated there was a 5.4-month supply of new homes available for sale, up slightly from October’s 5.3-month supply. The supply of new homes last peaked at the 7-month level back in December 2018.

New-home sales increased in the Northeast (up 52.4%) and the West (up 7.5%). Sales volume dropped 4.1% in the South and remained flat in the Midwest.

Big picture: From the beginning of summer onward, new-home sales have improved, especially as mortgage rates dropped well below 4%.

And if home-builders’ confidence is an accurate indicator, sales volume should remain strong for months to come. Last week, the National Association of Home Builders reported that confidence within the home-building industry had hit the highest level since 1999. Driving the surge in confidence were expectations that sales activity and buyer traffic would improve in the coming months.

Most economists expect a bright future for new home sales activity in 2020. The U.S. housing market is currently plagued by a severe lack of homes available for sale. As a result, new homes are capturing the interest of buyers eager to find a place to live.

What they’re saying: “Looking ahead into 2020, we expect new home sales to remain supportive to the overall housing market, aided by low mortgage rates, solid demand, tight inventory in the secondary sales market, and a healthy labor market,” wrote Sam Bullard, managing director and senior economist at Wells Fargo Corporate & Investment Banking WFC, +0.90%.

Market reaction: The Dow Jones Industrial Average DJIA, +0.34% and S&P 500 SPX, +0.09% increased slightly in Monday morning trades, while the 10-year Treasury note’s TMUBMUSD10Y, -0.50% as down.

Shares of home-building firms PulteGroup PHM, -1.82% and D.R. Horton DHI, -1.66% dropped ahead of the new home sales data, while shares of Lennar Corp. LEN, -1.77% rose in morning trading.

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