New Home Sales Soar To Highest Level In 13 Months

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New Home Sales Soar To Highest Level In 13 Months

Jun 1, 2023 | News | 0 comments

Despite a lackluster performance in existing home sales, the market for new residences is experiencing a significant upswing, with sales of new single-family homes reaching a peak not seen in 13 months during April.

The latest data, published in collaboration with the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, projected new home sales at an annual rate of 683,000 after seasonal adjustments. This reflects a 4.1% increase compared to the revised rate of 656,000 units in March and an 11.8% rise from the 611,000-unit rate recorded in April 2022.

The actual number of transactions exceeded the predictions of economists, as a Reuters poll of industry experts had anticipated April’s new home sales to reach 665,000 units.

Amidst the ongoing scarcity of existing homes, the market for new homes remains favorable. According to the National Association of Realtors, the supply of existing homes stands at a meager 2.9 months at the current sales rate, with resale inventory still 44% lower than pre-pandemic levels.

Builders are taking proactive measures to stimulate activity by offering buyer incentives, including discounts and lender point buydowns. These efforts are contributing to a downward trend in median home prices.

According to Odeta Kushi, First American Financial Corp’s deputy chief economist, new home prices experienced the most significant year-over-year decline since April 2020. The median sales price of new homes sold in April 2023 stood at $420,800, marking an 8.2% decrease compared to the previous year and a 7.7% decrease compared to the previous month. Builders are actively providing incentives, including price reductions, to attract potential buyers.

Builder confidence in the market has substantially increased recently, driven by a surge in interested buyers seeking both available supply and affordability. This has led to a growing interest in the new home segment.

Kushi emphasized that while there is demand from interested buyers, the availability of homes for sale is limited. In terms of inventory turnover, which represents the supply of homes for sale as a percentage of occupied residential inventory, the historical average is approximately 2.5%. This translates to around 250 homes for sale out of every 10,000. However, in April, the housing inventory was only 1.2%, significantly below the historical norm.

Given the reluctance of existing homeowners to sell, buyers may shift their focus to the new home market. Builders are in a unique position to take necessary actions to move inventory and boost sales.