New-build sales were much weaker than expected for November, and builders’ stocks are not doing well. Shares of the biggest names, such as Lennar, Pulte, DR Horton and Toll Brothers, fell more than 2% on the news.
According to the US Census, new home sales fell 11% more than expected in November.
The October reading was also revised lower. Sales were 841,000 on an annual basis, down from its July peak of 979,000. These figures are based on signed contracts, not closures. Sales were up 20.8% year over year.
The decline may be due to prices, which have risen steadily. The median price of a newly built home increased 2.2% from November 2019 to $ 335,300.
“As a sign that affordability will remain a primary challenge, entry-level home sales – priced below $ 200,000 – accounted for just 2% of total sales,” said George Ratiu, senior economist at realtor.com. “These numbers reflected the slowing economy, rising unemployment claims and the growing affordability challenge that held back business despite record low mortgage rates.”
Mortgage rates fell dramatically in November, when these sales were signed. That gave buyers more purchasing power, but probably also helped prices to rise for the same reason.
“I have to wonder if the aggressive house price hike is starting to affect that new buyer. After all, it was Toll Brothers who used the term ‘sticker shock’ for some when they reported income a few weeks ago,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.