Sales of newly built, single-family homes in September fell 3.5% to 959,000 from a downwardly revised August number, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Despite the monthly decline, the September rate is 32.1% higher than the September 2019 pace, and on a year-to-date basis, new home sales are up 16.9% in 2020.
It takes 400 tons of aggregates to construct the average modern home, according to the National Stone, Sand & Gravel Association.
“With sales up 32% from a year ago, the demand for new single-family homes remains strong as interest rates are at historic lows,” said National Association of Home Builders (NAHB) Chairman Chuck Fowke. “However, the recent run-up in lumber and other material costs is leading to an increase in pricing.”
“The pace of new home sales growth over the summer was going to slow given that the gap between sales and single-family construction reached an all-time high in August,” said NAHB Chief Economist Robert Dietz. “Indeed, September sales of new homes that had not started construction were up 47% compared to a year ago.”
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the September reading of 959,000 units is the number of homes that would sell if this pace continued for the next 12 months.
Inventory inched up to a 3.6 months’ supply, with 284,000 new single-family homes for sale, 32.1% lower than August 2019. This is the third consecutive month with inventory running under four months’ supply. Of the inventory total, just 48,000 are completed, ready to occupy. These inventory numbers point to additional construction gains ahead, as indicated by record levels of the NAHB/Wells Fargo Housing Market Index.
The median sales price was $326,800. The median price of a new home sale a year earlier was $315,700.
Regionally, on a year-to-date basis, new home sales were up in all four regions: 22.5% in the Northeast, 25.9% in the Midwest, 14.4% in the South, and 18% in the West.
Dodge Momentum Index Posts Dip
The Dodge Momentum Index fell 1.8% in October to 127.5 (2000=100) from the revised September reading of 129.8. The Momentum Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.
The commercial component of the Momentum Index lost 4.4% over the month, but the institutional component gained 3.3%.
The Momentum Index has struggled to make consistent gains since passing its post-pandemic low in June. Economic growth has slowed over the past few months, creating weaker demand for commercial projects. The fear about a new wave of COVID-19 infections may also be impeding planning activity in consumer-focused projects such as hotels and retail, although planning for warehouse projects continues to impress.
Even with this month’s gain, the institutional component of the Momentum Index remains well below levels seen prior to the pandemic as state and local entities come to grips with the widening budget chasm.
In October, 10 projects each with a value of $100 million or more entered planning. The leading commercial projects were a $200 million office complex in New York and a $100 million Amazon warehouse in Spokane, Wash. The leading institutional projects were two research labs valued at $300 million each, associated with the Dorchester Bay City project – a redevelopment of the Bayside Expo Center in Boston.