Economic Report Archives | Email alerts

Dec. 23, 2020, 10:34 a.m. EST

New-home sales fall as buyers begin to get cold feet in an expensive market

Cooler weather has put a damper on the hot housing market

Watchlist Relevance

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Dow Jones Industrial Average (DJIA)
  • X
    S&P 500 Index (SPX)
  • X
    PulteGroup Inc. (PHM)

or Cancel Already have a watchlist? Log In

By Jacob Passy

Getty Images
Getting into a new home is more expensive these days than it was a year ago, which is bad news for home buyers looking for a deal.

The numbers: Sales of newly built homes occurred at a seasonally-adjusted annual rate of 841,000 in November, the Census Bureau reported Wednesday . That was 11% below the downwardly-revised pace of 945,000 in October.

Analysts polled by MarketWatch had projected new-home sales to occur at a seasonally-adjusted annual rate of 875,000. Compared to last year though, November’s numbers remained elevated, up nearly 21% year-over-year.

What happened: New-home sales fell across all parts of the country, led by a 43% decline in the Midwest.

Inventory rose markedly by month’s end, up some 14% to a 4.1-month supply. A six-month supply of homes is generally considered indicative of a balanced market. The median price of new homes for sale was $335,300, down from October but up 5% from a year ago.

The big picture: The dip in sales in November is a sign that buyers are cooling on the market, in tandem with the cooler weather. “While buyers continue to favor larger homes with bigger backyards and better quality of life, steeply-rising prices are driving a wedge between their preferences and their wallets,” said George Ratiu, senior economist at

Indeed, the rising cost of new homes points to the challenges buyers will face as we head into the new year. The increase in sales prices for newly constructed homes is a reflection mainly of higher building costs. Nevertheless, with the supply of existing homes so constrained, buyers will face tough competition for most properties, driving the prices higher.

Builders will face a challenge in 2021: There’s high demand for more affordable homes, but those homes offer less of a return for construction firms. “New home builders must navigate rising construction costs and shifting consumer preferences to boost the availability of affordable new homes,” Ratiu said.

What they’re saying: “Inventories are tight — down 14.2% year-over-year in October — and could be a constraint for home sales going forward,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, in a research note.

Market reaction: Market reaction: The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.02%   and S&P /zigman2/quotes/210599714/realtime SPX +1.05%  ere up Wednesday, despite confusion as to the fate of the latest stimulus package..

Meanwhile, shares of home-building firms PulteGroup /zigman2/quotes/201694804/composite PHM +2.72% , LGI Homes /zigman2/quotes/202461766/composite LGIH +2.80% , and Lennar Corp. /zigman2/quotes/202536373/composite LEN +2.24%  were all down upwards of 2% following the release of the new-home sales report.

US : Dow Jones Global
+6.92 +0.02%
Volume: 0.00
Feb. 1, 2023 4:53p
+42.61 +1.05%
Volume: 0.00
Feb. 1, 2023 4:53p
$ 58.44
+1.55 +2.72%
Volume: 5.33M
Feb. 1, 2023 4:03p
P/E Ratio
Dividend Yield
Market Cap
$12.96 billion
Rev. per Employee
US : U.S.: Nasdaq
$ 117.04
+3.19 +2.80%
Volume: 293,692
Feb. 1, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$2.65 billion
Rev. per Employee
$ 104.69
+2.29 +2.24%
Volume: 2.81M
Feb. 1, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$29.09 billion
Rev. per Employee

Jacob Passy is a personal-finance reporter for MarketWatch and is based in New York.

This Story has 0 Comments
Be the first to comment
More News In
Personal Finance

Story Conversation

Commenting FAQs »

Today's Mortgage Rates

Type Rate Yield
30 yr Fixed Jumbo 6.50% 0.00%
30 yr Fixed 6.47% 0.00%
15 yr Fixed 5.73% 0.00%
10 yr Fixed 5.67% 0.00%
30 yr Fixed Refi 6.52% 0.00%
15 yr Fixed Refi 5.80% 0.00%
5/1 ARM 5.45% 0.00%
5/1 ARM Refi 5.36% 0.00%
Data provided by:

Partner Center

Link to MarketWatch's Slice.