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March 14, 2019, 11:51 a.m. EDT

New home sales drop 7% in January as housing market gets off to slow start in 2019

Sales of new homes fall to 607,000 annual rate in January

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By Jeffry Bartash, MarketWatch


Justin Sullivan/Getty Images
Sales of new homes have slowed in the past year, but a recent drop in mortgage rates might give the real estate market a boost.

The numbers: Sales of new U.S. homes in the U.S. dropped almost 7% in January, indicating the housing market got off to a slow start in early 2019 amid a partial government shutdown and patches of unusually harsh weather.

New-home sales declined to a 607,000 annual rate in January, according to government report delayed by the partial 35-day federal shutdown earlier this year. That’s how many new homes would be sold for the full year if sales were the same each month.

Economists polled by MarketWatch had forecast a 616,000 annual rate.

The decline in sales doesn’t look so bad, however, after upward revisions in sales in December and November.

The government said sales in the final month of 2018 rose at a 652,000 annual pace instead of 621,000 as initially reported. The November rate was raised to 628,000 from 599,000.

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What happened: Sales fell by double digits, in percentage terms, in every region except the West. Sales jumped 28% in the western part of the U.S.

New home sales were 4.1% lower in January compared to one year ago.

The median sales price of new homes, meanwhile, fell again to $317,200. Prices were 3.8% lower vs. one year ago, reflecting a decline in demand.

At the current pace of sales, it would take 6.6 months for all the new homes to be sold. That’s a bit higher than the six-month supply that’s long been considered a sign of a smoothly operating housing market.

The preliminary report on new home sales is often erratic and prone to large revisions as the changes in the final two months of 2018 show.

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Big picture: The sluggish real estate market exerted a slight drag on the U.S. economy in 2018 and it’s unlikely to help much this year, either. Builders say it’s gotten harder and more expensive to find available lots, not to mention skilled craftspeople to do the work.

A big drop in mortgage rates might help goose sales in 2019, but it won’t do much to alleviate the chronic dearth of homes for sale. A flush of new rental units might also draw off potential home buyers.

Read: Inflation perk ups, CPI shows, but not enough to set off any alarm bells

What they are saying?: “It is hard to visit a construction site when there is snow or it is so cold you don’t want to step outside,” said Joel Naroff of Naroff Economic Advisors. “In large parts of the nation, that is what happened. And then there was the hit to confidence that the shutdown created, which didn’t help either.”

“As indicated by recent strength in homebuilders’ activity, starts and pending sales, housing demand should pick up in coming months in response to the recent decline in mortgage rates,” said senior economist Sal Guatieri at BMO Capital Markets.

Market reaction: The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +3.15% and S&P 500 /zigman2/quotes/210599714/realtime SPX +2.62% fell in early Thursday trades.

Share of large publicly traded builders D.R. Horton /zigman2/quotes/202032328/composite DHI +5.41% Meritage Homes /zigman2/quotes/209069331/composite MTH +3.62%   and KB Home /zigman2/quotes/206220859/composite KBH +4.43%  were little changed in Thursday trades.

The 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +8.97% was flat at 2.64%.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,110.98
+829.16 +3.15%
Volume: 544.41M
June 5, 2020 5:07p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,193.93
+81.58 +2.62%
Volume: 4.80B
June 5, 2020 5:07p
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/zigman2/quotes/202032328/composite
US : U.S.: NYSE
$ 56.48
+2.90 +5.41%
Volume: 4.90M
June 5, 2020 4:00p
P/E Ratio
11.15
Dividend Yield
1.24%
Market Cap
$19.48 billion
Rev. per Employee
$1.93M
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/zigman2/quotes/209069331/composite
US : U.S.: NYSE
$ 76.33
+2.67 +3.62%
Volume: 550,232
June 5, 2020 4:00p
P/E Ratio
10.08
Dividend Yield
N/A
Market Cap
$2.77 billion
Rev. per Employee
$4.61M
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/zigman2/quotes/206220859/composite
US : U.S.: NYSE
$ 36.32
+1.54 +4.43%
Volume: 2.31M
June 5, 2020 4:00p
P/E Ratio
11.43
Dividend Yield
0.99%
Market Cap
$3.15 billion
Rev. per Employee
$2.37M
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
0.90
+0.07 +8.97%
Volume: 0.00
June 5, 2020 4:58p
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Jeffry Bartash is a reporter for MarketWatch in Washington.

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