New-home sales were spurred last month as builders slashed prices, according to data released by the U.S. Census Bureau today. Unfortunately, the 5.7% jump from August’s sales (numbers were still 0.9% behind last year) must be taken with a tablespoon of salt given that the report comes with a disclosure that the estimate was not statistically significant. In other words, the Census Bureau can’t tell with accuracy whether sales actually increased or decreased.
One way to get around the problem, suggests Patrick Newport, U.S. economist at IHS Global Insight, is by looking instead at quarterly data, which offer a more accurate picture. Each of the past five quarters has reported an average annual rate of between 291,000 and 309,000, marking the five lowest quarterly readings on record, with data going back to 1963.
Regionally, sales were up in the South and West, and down in the Northeast and Midwest.
The report’s pricing information may or may not be more accurate than its sales estimates. The report doesn’t include an error margin for those numbers, and the pricing data can be easily swayed by which region did the best in a given month, Newport says. However, if the data can be trusted, the median sales price dropped 3.1% to $204,000.
Compared with data from the National Association of Realtors, the dip narrowed the gap between the median prices of new and existing homes by 1%. While both new- and existing-home prices have been forced downward by distressed property sales, the gap between them has been narrowing as new homes have had to slash prices more quickly to compete: In September, the median price of a new home stood 23.2% above that of an existing home, compared with 24.2% higher in August and 29.7% higher in September 2010.
One bright spot in the report was the level of for-sale inventory of new homes, which remained at 163,000, a record-low. But overall, the report didn’t offer much hope; in March through August of this year, Americans bought fewer homes than in any six-month period on record, and this month’s sales report couldn’t guarantee whether or not September fared any better.
"These are the worst we’ve ever seen," Newport said on a call with Builder today. "This is going to be the worst year on record, unless the numbers take off suddenly, and there’s no reason to expect them to."
Claire Easley is a senior editor at Builder.
Learn more about markets featured in this article: Greenville, SC.