While existing home sales remain underwhelming, deals for new residences continue to surge as sales of new single-family homes rose to a 13-month high in April.
The most recent numbers, jointly released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, estimated new home sales at a seasonally adjusted annual rate of 683,000. That’s up 4.1% from the revised rate of 656,000 units in March, and it’s 11.8% above the 611,000-unit rate in April 2022.
Transaction count surpassed economists’ expectations, with a Reuters poll of industry experts predicting April new home sales at 665,000 units.
The new home market continues to be a beneficiary of incredibly short supply among existing homes. The National Association of Realtors recently reported that existing homes have a scant 2.9 months of supply at the current sales pace while resale inventory is still 44% below pre-pandemic norms.
“New home inventory as a share of total home inventory in April reached nearly 29%,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “From 2000 until the pandemic, new homes, on average, made up about 11% of total inventory. When existing homes are hard to find, new homes at the right price are a good substitute.”
Builders are still being proactive in encouraging movement via buyer incentives such as discounts and lender point buydowns, thereby helping to push median home prices downward.
“New home prices saw the largest annual decline since April 2020,” Kushi noted. “The median sales price of new homes sold in April 2023 was $420,800, down 8.2% from one year ago and down 7.7% from last month. Builders are offering incentives, including price reductions, to entice buyers.”
Builder confidence in the marketplace has grown by leaps and bounds of late as interested buyers searching for both supply and affordability have turned to the new home segment in increasing numbers.
“Big picture, there are interested buyers out there but a limited inventory of homes for sale,” Kushi said. “The historical average for inventory turnover, the total supply of homes for sale as a percentage of occupied residential inventory, is approximately 2.5%, or 250 homes for sale out of every 10,000. In April, housing inventory was 1.2%, 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.”