May 09, 2019
Fewer New Homes Selling
A major ongoing news item in the real estate world is the drop in house sales during the latter portion of 2018. While it’s fairly clear that this does not foretell of major recession—the likes of which we saw in the wake of the 2008 housing crisis—it may mean that we are seeing the beginning of a natural downcycle in the market. Perhaps it is a sort of necessary correction to the heated market we saw in 2017, when many areas saw sometimes vicious bidding wars for homes. That was a clear seller’s market, and, well, nothing lasts forever—though many are saying it may continue in a diminished capacity.
Still, proof continues to emerge that the decline in this seller’s market is becoming entrenched for the time being. A report by Redfin released earlier this year, for example, covered the effect on the downturn specifically on new homes.
According to this report, every one of the four major housing regions—Northeast, South, Midwest, and West—saw drops in the sales of new homes over the course of November and December of 2018, amounting to double-digit decreases in each of the areas during that period.
The Northeast saw the greatest drop-off: While the other regions suffered only single-digit percentage point falls during November alone, the Northeast’s decrease in new home sales was -12.3 percent; and in December, when every region was experiencing double digit decreases, the Northeast’s share of the decrease was largest, at -16.1 percent. Meanwhile, that region alone has experienced no growth since early 2017.
Next in the chain of suffering in late 2018 came the West region: In November, it saw an -8.6 percent decrease in new home sales. In December that number had grown to -13.4 percent.
Interestingly, the South and the Midwest switched places from November to December. In November, the South’s decrease was higher at -2.9 percent, while the Midwest’s drop was a mere -2 percent. But in December, while the South’s gap had grown to -10.3 percent, the Midwest’s had leapfrogged it to -13.4 percent.
The national average of decrease in new home sales in November was -4.6 percent. By the end of December this gap had increased to -11.6 percent overall.
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