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New Home Sales Fall Back in June

Sales of newly built, single-family homes fell 5.3 percent in June to a seasonally adjusted annual rate of 631,000 units after a downwardly revised May report, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“Uncertainty caused by tariffs and the talk of trade wars are making home buyers more cautious, and builders are taking note of this situation,” said Randy Noel, chairman of the National Association of Home Builders (NAHB) and a custom home builder from LaPlace, La. “Not only are consumers and builders concerned about the current lumber tariffs, but also the next round of proposed tariffs on a number of goods and services.”

“Though this is the lowest monthly annualized sales pace since October 2017, new home sales for the first half of 2018 are up 6.9 percent on a year-to-date basis compared to last year,” said NAHB Chief Economist Robert Dietz. “This indicates solid demand for new home construction.”

A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the June reading of 631,000 units is the number of homes that would sell if this pace continued for the next 12 months.

The inventory of new homes for sale was 301,000 in June, which is a 5.7-month supply at the current sales pace. The median sales price was $302,100.

Regionally, new home sales rose 36.8 percent in the Northeast. Sales fell 13.4 percent in the Midwest, 7.7 percent in the South and 5.2 percent in the West.

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Remodeling Confidence Increases Despite Rising Costs

The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) posted a reading of 58 in the second quarter of 2018, up one point from the previous quarter. The RMI has been consistently above 50—indicating that more remodelers report market activity is higher compared to the prior quarter than report it is lower—since the second quarter of 2013. The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity.

“Remodelers across the country continue to see demand,” said NAHB Remodelers Chair Joanne Theunissen, CGP, CGR, a remodeler from Mt. Pleasant, Mich. “However, the rising cost of materials is impeding the market’s ability to be even stronger.”

Current market conditions decreased one point from the first quarter of 2018 to 57. Among its three major components, major additions and alterations waned one point to 55, minor additions and alterations decreased two points to 58, and the home maintenance and repair component rose two points to 59.

The future market indicators gained four points from the previous quarter to 59. Calls for bids fell two points to 55, amount of work committed for the next three months increased two points to 56, the backlog of remodeling jobs jumped nine points to 66 and appointments for proposals rose seven points to 61.

“Improving economic growth is supporting demand for home remodeling,” said NAHB Chief Economist Robert Dietz. “However, remodelers have to deal with rising material prices, especially lumber, and the continued shortage of labor to keep prices competitive. The labor shortage is also a factor contributing to the increasing backlog of remodeling jobs.”

For the full RMI tables, please visit www.nahb.org/rmi. For more information about remodeling, visit www.nahb.org/remodel.

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