skip navigation

By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.


New-Home Sales Recover From Hurricane-Depressed Levels

New-home sales rose 6.2% in October off a nice increase in September, although the latter was revised downward by 3.3%. The September and October gains in new-home sales are mostly a reversal of depressed home sales levels seen in July and August, when a series of hurricanes pummeled the Southeast and kept potential homebuyers out of the market. Thus, even with the (revised) 14.2% increase in September and the October gains, average new-home sales for the last four months are still only on par with the prevailing sales levels of the first six months of 2017.

In other words, the last two months’ home sales data do not point to any net improvement in housing demand, but merely a reversal of hurricane-induced weakness. On net, new-home sales have remained flat for most of the past year, alongside similarly flat levels of home construction. As seen in the accompanying chart, housing starts also saw a bounce in October, and this bounce also merely served to offset hurricane-induced softness in starts in previous months.

The recent swings in housing starts have not been as sharp as those seen for new-home sales, but the contours are in line. Also supporting our contention here is the fact that most of the recent swings in both housing starts and new-home sales occurred in the South, exactly where the hurricane effects were felt.

If we are right, we will see declines in November in both single-family housing starts and new-home sales. That is, if the elevated levels of starts and sales in October are merely a catch-up of hurricane-delayed activity, then both starts and sales will revert to their “ongoing” levels in November or December; these levels will be announced in December and January.

As before, we are not claiming that there is any actual weakness in housing. Our contention is that the market has topped out over the last year and will remain flat going forward, such that homebuilding will not be a source of any boost to GDP growth.

Consistent with this contention is the fact that inventories of new homes have continued to increase across the last four months. New-home supply remains a bit ahead of demand, and our guess is that homebuilders will delay pushing construction levels higher until they see a net advance in new-home demand.

Sales and Starts of New, Single-Family Homes
Sales and Starts of New, Single-Family Homes
Source: Census Bureau. As of 31 Oct 17

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 44 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive email updates as new reports are released.

© Western Asset Management Company, LLC 2021. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.