Housing Market Update: New Home Sales in September | Episode 062 | 10-25-23

Megan Horneman, Chief Investment Officer at Verdence Capital Advisors, discusses the surprising trends in the housing market, particularly new home sales in September. While there's been an increase in new home sales across regions, the median price of new homes has dropped consistently, reaching the worst annual decline since the Great Recession. She discusses the broader impact of these trends on the housing market, existing home sales are virtually non-existent, and mortgage applications are at a historic low since 1995.  Megan suggests that the decrease in new home sales might eventually influence the existing home sales market.

Hello, this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors. We're coming to you today with our regular segment of Markets. With Megan, we're going to talk about some of the housing data that we received this morning. We got new home sales in September, so these are newly constructed homes that were for sale. Actually, it was a surprising jump that we saw for the month, and all four of the regions the South, the Midwest, the Northwest and the Mid-Atlantic all rose for the month. We saw the median price of new homes, though that dropped for the second consecutive month and on a year-over-year basis, it's been dropping consistently. It's now down 12% on a year-over-year basis. Just to put that in perspective, it's the worst annual drop we've seen since the Great Recession. What does this mean? New home sales? They're quite volatile. These are newly constructed homes.

The rest of the housing market is still really at a standstill. When you look at existing home sales, they're basically non-existent. When you look at mortgage applications, which also came out today mortgage applications for the lowest level we've seen since 1995. The rest of the housing market is still basically paralyzed. The new home sales, as we mentioned, is a quite volatile series. What does this mean, though, when you get these different mixed data within the housing market.

The broad housing market is still quite weak. It is going to strain economic growth and it's basically locking people in their current homes with very little mobility because interest rates are so high. The 30-year mortgage rate is approaching 8% and with the sell-off we're seeing in long-term treasury yields it's likely to go higher. There's continued stress on the existing home market. The drop in prices, though that's going to be welcome news to the Fed, because one of the things the Fed is looking at is the housing costs, the shelter costs. These are going to be more correlated to existing home sales, but we have seen such a pretty big drop in new home sales that we're hoping that'll filter into some of the existing home sales market as well. That's all we have today. If you have any questions or comments, please feel free to reach out to podcast at Verdence dot com Thank you.