New home sales increased 4.1% in April compared with March and were up 11.8% compared with April 2022, according to estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
As of the end of the month, new home sales were running at a seasonally adjusted annual rate of about 683,000, up from about 656,000 the previous month and up from 611,000 a year earlier.
The median sales price of a new home sold in April was $420,800.
The average sales price was $501,000.
As of the the end of April there were about 433,000 new homes available for sale in the U.S. – about a 7.6-month supply at the current sales rate.
Odeta Kushi, deputy chief economist for First American, says builders are currently motivated to increase production as inventory is low yet there is strong demand for new homes. Helping to spur that demand is the fact that new home prices have been dropping lately.
“New-home prices saw the largest annual decline since April 2020,” Kushi says in a statement. “The median sales price of new homes sold in April 2023 was $420,800, down 8.2 percent from one year ago and down 7.7 percent from last month. Builders are offering incentives, including price reductions, to entice buyers.”
“New-home inventory as a share of total home inventory in April reached nearly 29 percent,” Kushi says. “From 2000 until the pandemic, new homes on average made up about 11 percent of total inventory. When existing homes are hard to fine, new homes at the right price are a good substitute.”
Kushi notes that most of the new homes that became available in April have not yet been started.
The total new-home inventory consisting of completed and ready to occupy homes is now at 16.2 percent, which is an increase of 106 percent year over year, but still down from more than 20 percent from pre-pandemic levels,” she says.
“Higher builder costs remain a headwind to building more entry-level homes,” Kushi adds. “In April 2023, only 15 percent of new-home sales were priced below $300,000, which is significantly lower relative to the pre-pandemic April 2019 share of 37 percent.”
“Big picture – there are interested buyers out there, but a limited inventory of homes for sale,” Kushi says. “The historical average for inventory turnover, the total supply of homes for sale as a percentage of occupied residential inventory, is approximately 2.5 percent, or 250 homes for sale out of every 10,000. In April, housing inventory was 1.2 percent, well below the historical norm.
“With existing homeowners not selling, buyers may turn to the new-home market and builders are in a unique position to do what’s necessary to move inventory and bolster sales.”
Photo: Dillon Kydd