Sales of new homes reportedly fell 18 percent in December compared with a year earlier to end a dismal 12 months for the housing industry.
CNBC reported the figures, citing to data compiled by John Burns Real Estate Consulting, a California-based housing research and analytics firm.
Due to the partial government shutdown, official government figures on home sales for November and December have not been released.
“Sales were also down a steep 19 percent annually in November, according to JBRC's analysts. The firm counts 373 market ratings by local builders overseeing more than 3,500 new home communities, estimated to be 16 percent of U.S. new home sales. JBRC's figures correlate closely with government readings,” CNBC reported.
Investors in U.S. homebuilders are holding their breath heading into the New Year as experts predict softening demand in 2019, mainly driven by higher borrowing costs.
Gradual interest rate hikes by the Federal Reserve helped slow the housing market in the second half, with weakness starting over the summer and becoming more pronounced in the fall. Confidence among U.S. homebuilders has plummeted to the lowest level since 2015, signaling that the industry’s struggles are intensifying, recent data showed, Bloomberg explained.
To lure buyers, homebuilders are cutting prices. This is adding to margin pressures in an industry that’s yet to see any meaningful relief in development costs or prices for building materials, financing and labor, according to a report from Wells Fargo.
‘‘Sales of new and existing homes and new home construction continue to come in below expectations, and most of the leading indicators show the trend is likely to continue and perhaps intensify,’’ Wells Fargo analysts led by Mark Vitner wrote.
The hurdles facing homebuilders are unlikely to relent soon and home sales and new home construction should continue to underperform the broader economy, according to the Wells Fargo report. The S&P 1500 Homebuilding group is down 31 percent this year compared with a 3.9 percent decline in the S&P 500 Index.
To be sure, sentiment among U.S. homebuilders fell in December to the lowest level since 2015, missing all forecasts and signaling that the industry’s struggles are intensifying amid elevated prices and higher borrowing costs, Bloomberg reported.
The National Association of Home Builders/Wells Fargo Housing Market Index dropped to 56 from 60 in the prior month amid broad-based declines across sales, expectations and buyer traffic, data released last month showed.
The median estimate in Bloomberg’s survey had called for it to hold at 60. With November’s eight-point decrease, it was the biggest two-month decline since October 2001.