New Home Sales, commonly referred to as “new residential sales,” is an economic indicator that tracks the sale of newly constructed residences. It is extensively watched by investors since it is seen as a lagging signal of real estate market demand and, thus, a factor influencing mortgage rates. Household income, unemployment, and interest rates are all variables that influence it.
The United States Census Bureau releases two versions of the New Home Sales metric: a seasonally adjusted figure and an unadjusted one. The adjusted value is shown as a yearly total, whereas the unadjusted figure is presented as a monthly total. These numbers are provided for several areas and the entire nation.
New home sales are completed when a sales contract or deposit is signed or accepted. In any stage of construction, the home might be: not yet started, in the process of being built or fully finished. About 10% of the US housing market is made up of new house sales. Preliminary numbers for new single-family home sales are subject to major changes because they are mostly based on data from construction permits.
An Insightful Overview of New Home Sales in Sept 2024
As we explore the New Home Sales Trends, it's clear that the housing market is experiencing notable shifts. In September 2024, sales of newly built single-family homes reached a seasonally adjusted annual rate of 738,000, marking a 4.1% increase from August and a 6.3% rise compared to the same month last year. These increases represent the fastest sales pace since May 2023. With median home prices settling at $426,300, the market is adjusting to various influencing factors, including mortgage rates and buyer incentives tailored by home builders.
Key Takeaways
- Sales Surge: New home sales climbed to 738,000 units in September 2024, a significant jump from previous months.
- Median Price Insights: The median sales price for new homes stands at $426,300.
- Inventory Levels: There were 470,000 new houses available at the end of September, translating to a 7.6-month supply at the current sales rate.
- Market Competition: The new home market is increasingly competing with existing homes.
- Mortgage Rates Impact: While mortgage rates fell initially, they have since begun to rise again, influencing buyer strategy.
Analyzing the New Home Sales Trends
The rise in new home sales can primarily be attributed to builders' efforts to adjust to a competitive market characterized by high existing home prices and slightly declining mortgage rates. According to the latest reports from the U.S. Census Bureau and the Department of Housing and Urban Development, the surge reflects the highest sales levels in 16 months as builders provide incentives to attract hesitant buyers. Additionally, the median price of new homes sold has shown a modest increase of 3.7% since August but remains almost stable year-over-year.
While existing-home sales dropped to a 16-year low, new homes are becoming a more attractive option. This shift suggests that buyers are gravitating toward new construction as builders promote affordability through rate buy-downs and incentives that existing home sellers typically do not offer.
Current Inventory and Market Supply of New Homes
The occupancy of new homes significantly influences market dynamics. With 470,000 new houses recorded for sale at the end of September, there's a tangible supply that reflects a 7.6-month supply based on current sales rates. This balance means that even as sales increase, the inventory remains sufficiently robust to meet demand without causing a rapid escalation in prices. In the past few years, new homes have been priced about 5% higher than existing homes, which has contributed to an emerging trend where builders are pivoting to construct smaller and more affordable homes in response to economic pressures.
The Impact of Mortgage Rates on New Home Sales Trends
Mortgage rates have historically played a crucial role in the housing market. Recent data showed initial declines in mortgage rates, leading to a surge in buying activity. However, an unexpected spike in rates has hampered some buyer enthusiasm. The average rate on a 30-year fixed mortgage hovers around 6.44%, following a rise from a two-year low.
Industry experts, including economist Lisa Sturtevant, suggest that potential buyers might be holding off, waiting for rates to decline further, especially with the upcoming elections looming, which could introduce uncertain economic factors.
Interestingly, even as rates have fluctuated, many builders are improving affordability plans for potential buyers. The trend of incentivizing purchases, such as offering mortgage rate buy-downs, is becoming more common. This strategy can serve to bridge the gap for buyers anxious about rising rates while stimulating demand in the new home market.
Competition Between New and Existing Homes
As new home sales rise, they're beginning to directly compete with existing homes, particularly as those homeowners become more inclined to sell. According to the National Association of Realtors, existing-home sales dropped significantly in September, making room for new homes to fill the gap left by discouraged buyers from the existing market.
With the substantial differences in pricing that once existed between new houses and pre-owned ones—frequently ranging between 20% to 30%—the current gap of 5% highlights a closing disparity, indicating that buyers may find themselves weighing their options more carefully as sellers become increasingly motivated.
Future Projections of New Home Sales Trends
Looking ahead, experts remain cautious yet optimistic. Ruben Gargallo Abargues from Capital Economics anticipates that new home sales may not rise dramatically as rates continue to fluctuate. If mortgage rates climb toward 6.5% as projected, the impact on buyer activity could be real and palpable. The connection between mortgage rates, existing home sales, and overall economic sentiment will be a focal point for both builders and buyers in the months to come.
New Home Sales Trend [Previous Months]
Here's the region-wise tabular data for new home sales from March 2023 to March 2024. The units displayed are in thousands and are the seasonally adjusted annual rate. The data estimates only include new single-family residential structures. Sales of multi-family units are excluded from these statistics.
NORTHEAST: Connecticut, Maine, Massachusetts New Hampshire New Jersey New York Pennsylvania Rhode Island Vermont
MIDWEST: Illinois, Iowa, Indiana, Kansas, Michigan, Minnesota, Missouri, Nebraska North Dakota Wisconsin South Dakota Ohio
SOUTH: West Virginia, Virginia, Texas, Tennessee, South Carolina, Oklahoma, North Carolina, Mississippi, Maryland, Louisiana, Kentucky, Georgia, Florida, Alabama, Delaware, District of Columbia, Arkansas
WEST: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming
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