New home sales fell 10.9% month over month in September, according to the latest report from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
The contraction brought sales down to a seasonally adjusted annual rate of 603,000 units, significantly below the downwardly revised pace of 677,000 units in August. Year over year, new home sales were down 17.6% from the 732,000-unit pace of September 2021. Year to date, new home sales are trailing last year’s pace by 14.3%.
“Moreover, sales are now down 1.9% on the same basis compared to 2019 levels that were prior to the COVID-related changes to interest rates,” said Robert Dietz, chief economist for the National Association of Home Builders (NAHB).
Economists polled by Reuters projected new home sales at a rate of 585,000 units, so in some respects, new home sales exceeded expectations. But a big decrease was nonetheless widely foreseen after a transitory pullback in mortgage rates in August led to a surprising gain in new homes sold.
“Builders continue to face lower buyer traffic due to declining affordability conditions as the housing downturn continues,” said Jerry Konter, NAHB chairman. “Builder sentiment has declined for 10 consecutive months. The entry-level market in high-cost areas has been particularly affected, with growing numbers of first-time and first-generation buyers priced out of the market.”
Despite sales slowing, new home prices continue to rise. The median new home price in September was $470,600, up 13.9% year over year and 7.2% month over month.
Inventory, meanwhile, has grown due to the slowdown in deals. At September’s sales pace, there is a 9.2-month supply of new homes for sale, up from 8.1 months in August. The amount of homes available for sale in September was at 462,000, a gain of 23.2% from the same month last year. But only 56,000 units of the new home inventory are finished and ready to occupy, while the rest are either currently under construction or haven’t yet started to be built.