After surging more than 12% month over month in September, sales of new single‐family homes dropped 5.6% in October to a seasonally adjusted annual rate of 679,000, according to estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
Year over year, however, new home sales were up 17.7% compared with October 2022.
The median sales price for a new home sold in October was $409,300. The average sales price was $487,000.
As of the end of the month, there were about 439,000 new homes available for sale in the U.S. – about a 7.8-month supply at the current sales rate.
“Historically, the median sale price of a new home has been higher than that of an existing home, but that spread has steadily declined this year as the ‘rare and elusive’ existing home for sale just keeps getting more expensive,” says Ksenia Potapov, economist for First American, in a statement. “A new home provides a good alternative.
“Builders have been able to attract buyers from the existing-home market with incentives that have created affordability relative to existing homes,” Potapov says. “According to NAHB, 36 percent of builders reported cutting home prices in November and 60 percent of builders provided sales incentives of some kind.”
One key factor affecting supply is the ratio of homes that have been started but not yet completed to those that have already been completed.
“Builders are benefitting from the lack of resale inventory, but to relieve the supply pressure they need to deliver homes that are completed and ready to occupy,” Potapov says. “In November, 17 percent of the total new-home inventory for sale was completed, down from more than 20 percent pre-pandemic.
“Entry-level supply remains especially limited, even as millennials continue to age into their prime home-buying years,” she adds. “This month, 15 percent of new-home sales were priced below $300,000, up from 13 percent one year ago.”
“New home sales fell back in October as interest rates moved higher,” says Alicia Huey, chairman of the National Association of Home Builders (NAHB), in a separate statement. “Despite the challenging conditions, sales are up 4.6 percent on a year-to-date basis due to a lack of inventory in the resale market.”
“Median new home prices have moved lower as new home size has decreased in 2023,” adds Robert Dietz, chief economist for NAHB. “Combined with sales incentives and a lack of resale inventory, demand has remained solid in 2023 and should improve in 2024 as interest rates move lower.”
Photo: Todd Kent