U.S. consumer confidence improved in November following October’s less-than-enthusiastic sales of newly built single-family homes.
Both pieces of data were released Tuesday, ahead of the Thanksgiving holiday.
Sales of new single-family homes came in at a seasonally adjusted annual rate of 610,000 for October, according to jointly released estimates from the U.S. Census Bureau and Department of Housing and Urban Development (HUD). This represents a 17.3% decrease from September’s revised rate of new home sales (738,000) and is 9.4% below the Oct. 2023 estimate of 673,000.
However, more for-sale inventory has loosened in some markets in the time since, driving an increase in purchase applications for FHA and conventional loans.
Mortgage applications made their first increase in nearly two months the week ending November 8, though it was only by 0.5%, then rising again the following week by 1.7%.
"The new home market has been a relative bright spot in housing, but a combination of factors converged to zap its momentum in October," First America Chief Economist Odeta Kushi said following Tuesday's release. "Weather-related disruptions and the October surge in mortgage rates have dampened demand, even amid a rise in new-home inventory, which reached its highest point since 2008."
Kushi expects home builders will continue to benefit from the use of buyer incentives in months to come.
“However," she added, "builders continue to grapple with supply-side challenges and ‘higher-for-longer than we expected’ mortgage rates, which are a major headwind for builders and potential home buyers alike. Despite the challenges, the new-home market will likely continue to outperform the existing-home market over the near term because, unlike existing homeowners, builders are not rate locked-in.”
Signs that home buyers are warming up to sales conditions also came through in the Conference Board’s Consumer Confidence Index, which rose to 111.7 in Nov. 2024, up 2.1 points from 109.6 in October.
The Conference Board’s Present Situation Index — based on consumers’ assessment of current business and labor market conditions — increased by 4.8 points to 140.9 in Nov. 2024. The Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions — ticked up 0.4 points to 92.3, well above the threshold of 80 that usually signals a recession ahead.
“Consumer confidence continued to improve in November and reached the top of the range that has prevailed over the past two years,” The Conference Board Chief Economist Dana M. Peterson commented. “November’s increase was mainly driven by more positive consumer assessments of the present situation, particularly regarding the labor market. Compared to October, consumers were also substantially more optimistic about future job availability, which reached its highest level in almost three years. Meanwhile, consumers’ expectations about future business conditions were unchanged and they were slightly less positive about future income.”
This follows consumer confidence plummeting in September, with interest rates, prices, and inflation dominating consumer concerns.
The median sales price of new houses sold during the month of Oct. 2024 was $437,300, according to Census data.
The seasonally-adjusted estimate of new houses for sale at the end of October was 481,000. This represents a supply of 9.5 months at the current sales rate.
November’s Census report is scheduled for release on December 24.
