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Non-Government Data Shows New Home Sales Fell in 2018

This article was originally published on ETFTrends.com.

New home sales fell 18 percent during the month of December compared with December 2017, according to data compiled by John Burns Real Estate Consulting, a California-based housing research and analytics firm. Official government data wasn't available due to the ongoing shutdown, which is 21 days old.

In addition, JBRC's analyst data showed sales fell 19 percent annually in November. The firm uses 373 market ratings by local builders who oversee more than 3,500 new home communities.

Four interest rate hikes in 2018 certainly had a hand in the sales slump.

"I think the 4.5 percent plus mortgage rate is just a double whammy," said John Burns, CEO of JBRC. "It's keeping entry level buyers out of the market. They're very disappointed with what they can afford, and it's keeping current homeowners who want to move locked in, because their current mortgage rate is so much lower."

Real estate ETFs, however, sloughed off the data. Vanguard Real Estate ETF (VNQ) ticked 0.28 percent higher and Schwab US REIT ETF (SCHH) edged 0.23 percent higher.

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Rising in conjunction with mortgage rates were home prices, putting prospective buyers out of reach. The latest data from the National Association of Realtors showed that the Quarterly Housing Affordability Index has been dropping thanks to a rise in median home prices.

"Starting in our third quarter we really articulated the fact that over the past few years we've seen sales prices moving up rather rapidly. Now, when you layer on top of that the very quick moves in interest rates that we saw from the Fed, that translated into the mortgage rates, it really created an element of sticker shock," said Stuart Miller, chairman of Miami-based Lennar in an interview on CNBC's The Exchange.

According to the NAHB, the housing market accounts for roughly 15-18% of the United States’ gross domestic product. If an increasingly dovish Fed sees the housing market too far in the rearview mirror going forward, it may posit further before continuing future rate hikes.

"In November, we saw the market soften further, which we attribute to the cumulative impact of rising interest rates and the effect on buyer sentiment of well-publicized reports of a housing slowdown," said Toll's CEO Douglas Yearley in the release. "We saw similar consumer behavior beginning in late 2013, when a rapid rise in interest rates temporarily tempered buyer demand before the market regained momentum."

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