New home sales have leveled off now that mortgage interest rates stagnating at record lows. It would appear the massive stimulus from the Fed which began in March of this year has run its course. The big question is what comes next.
The Census Bureau reported new residential home sales for October at a seasonally adjusted annual rate of 999,000 units. This was better than expected and previous months were revised upward as well. Compared to October of last year, new home sales rose 41 percent. Median and average prices of new homes sold (contracted) in October were both higher as well. The median sales price was $330,600. The average sales price was $386,200.
The supply of new homes for sale stood at 3.3 months. That was unchanged from September, but down 40 percent from a year ago. The pandemic distortions with supply and demand are finally normalizing. Many of those assistance payments are coming to an end in December. Mortgage forbearance programs are also running into deadlines. There is a lot at stake for the housing market with the incoming administration.
What we have experienced in 2020 was another massive wealth redistribution towards the upper income cohorts. The stock market was hitting new highs this week and home prices have never been higher. It may sound crazy for real estate and equity prices to be booming while thousands of Americans are dying every day in the middle of a pandemic, but America’s priorities are not currently centered on public health.
The tag team of Mnuchin and Powell made it clear early on in the pandemic that bailing out the markets was the primary goal. Congress was happy to oblige, and the free-for-all advertised as pandemic assistance has left Wall Street unscathed. The billionaire class in America has never had it so good. Corporations are laying off American workers by the thousands even as they shell out $billions in dividend payments to shareholders. Small business owners have been decimated in 2020, but Walmart and Amazon are bathing in record sales.
North Texas new home sales are still running hot as builders try to get their hands on more land and lots to take advantage of this wild market. Closed sales of new construction were up 18 percent in the DFW area compared to a year ago and pending sales (contracts) show to be up 22 percent from October of 2019.
The inventory of new homes for sale in North Texas has never been lower. We currently have 2.3 months of supply for new homes in the area. Denton County has just 1.8 months of supply. It would be a mild understatement to say this is not a normal market.
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