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.
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