WASHINGTON -- New single-family home sales fell to near a one-year low in September after two straight months of gains, but a jump in prices suggested that housing remained on solid ground.
The Commerce Department said Monday sales dropped 11.5 percent to a seasonally adjusted annual rate of 468,000 units, the lowest level since November 2014. August's sales pace was revised down to 529,000 units from the previously reported 552,000 units.
%VIRTUAL-pullquote-The September report does little to alter our view that the housing market is continuing to recover.%The moderation in new home sales is at odds with other housing reports that have painted a bullish picture of the sector. New home sales, which account for 7.8 percent of the housing market, tend to be volatile on a month-to-month basis because they are drawn from a small sample.
"The September report does little to alter our view that the housing market is continuing to recover. We view the new home sales data as unreliable and many other more reliable housing indicators have been sending upbeat signals lately," said Daniel Silver, an economist at JPMorgan (JPM).
The housing index fell more than 1 percent on the data, underperforming a marginally weaker stock market. D.R. Horton (DRI), the largest U.S. homebuilder, dropped 2.7 percent. Lennar (LEN), the nation's second-largest homebuilder, fell 2.1 percent.
Prices for U.S. government debt rose, while the dollar slipped against a basket of currencies.
Housing Supporting Economy
A sturdy housing market is supporting consumer spending through an increase in household wealth, which is helping to soften the blow on the economy from faltering global growth, a strong dollar and weak capital spending in the energy sector.
Efforts by businesses to reduce an inventory bloat also have weighed on growth, leaving gross domestic product growth estimates for the third quarter running below a 2 percent annualized rate.
The economy grew at a 3.9 percent rate in the second quarter. The government will publish its advance third-quarter GDP estimate Thursday.
Economists had forecast new home sales slipping to only a rate of 550,000 units. Sales were up 2 percent compared to September of last year.
New home sales tumbled 61.8 percent in the Northeast to the lowest level since April. Sales declined 6.7 percent in the West and were down 8.7 percent in the populous South. In the Midwest, sales fell 8.3 percent.
With sales weak, the stock of new houses for sale increased 4.2 percent to 225,000 last month, the highest level since March 2010. Still, supply remains less than half of what it was at the height of the housing boom.
At September's sales pace it would take 5.8 months to clear the supply of houses on the market, the highest since July 2014. That was up from 4.9 months in August.
The median price of a new home rose 13.5 percent from a year ago to a nine-month high of $296,900.
"The strong price gains suggest either that the mix of houses shifted to more expensive houses or that homebuilders are pushing up prices," said John Ryding, chief economist at RDQ Economics in New York. "Weakening demand would be accompanied by slowing price gains or price declines."
9 Numbers That'll Tell You How the Economy's Really Doing
New Home Sales Drop to Near 1-Year Low
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.