A ‘Open House’ sign stands outside a new home for sale in the D.R. Horton Cambridge at Southbury development in Oswego, Illinois.
Daniel Acker | Bloomberg | Getty Images
Sales of newly built homes came in far weaker than expected for November, and builder stocks are not taking it well. Shares of the biggest names, such as Lennar, Pulte, DR Horton and Toll Brothers, dropped more than 2% on the news.
New home sales fell a steeper-than-expected 11% in November from October, according to the U.S. Census.
October’s reading was also revised lower. Sales hit an annualized rate of 841,000, down from the 979,000 peak in July. These numbers are based on contracts signed, not closings. Sales were up 20.8% year over year.
The pullback may be due to prices, which have been rising steadily. The median price of a newly built home rose 2.2% compared with November 2019, to $335,300.
“In a sign that affordability will remain a primary challenge, sales of entry-level homes — priced below $200,000 — accounted for only 2% of total sales,” said George Ratiu, senior economist at realtor.com. “These numbers reflected the slowing economy, rising unemployment claims, and growing affordability challenge, which hampered activity despite record-low mortgage rates.”
Mortgage rates dropped dramatically in November, when these sales were signed. That gave buyers more purchasing power, but also likely helped prices rise for the same reason.
“I do have to wonder whether the aggressive home-price gains is beginning to impact that first-time buyer. It was Toll Brothers after all that used the term ‘sticker shock’ for some when they reported earnings a few weeks ago,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.