In June, new home sales experienced a decline compared to the previous month, even as buyers turned to new construction as an alternative to the limited supply of existing homes for sale. According to a joint report from the US Department of Housing and Urban Development and the Census Bureau, sales of newly constructed homes dropped by 2.5% in June after a notable surge of 6.6% in May. However, they were still up by 23.8% compared to the same period last year.
This decrease in sales for June is further evidence that although the new construction market is benefiting from low inventory, affordability remains a concern. Homeowners with extremely low mortgage rates are hesitant to sell and buy another home at a much higher mortgage rate. Existing home sales have been declining in recent months, while new home sales have been on the rise.
The report indicated that sales of new single-family houses were at a seasonally adjusted annual rate of 697,000, slightly lower than the revised figure of 715,000 in May. However, these numbers were higher than the estimated rate of 563,000 for June of the previous year.
Freddie Mac reported that mortgage rates reached as high as 6.79% at the beginning of June, causing uncertainty in the financial industry due to the debt ceiling standoff. As a result, there was a decrease in mortgage applications.
In a positive turn for buyers, the report also showed a drop in the prices of new homes from May. The median price for a new home in June decreased to $415,400 from $416,300 the previous month.
Low inventory of existing homes
Despite the decline in sales from May, Kelly Mangold of RCLCO Real Estate Consulting sees a positive trajectory for new home sales. She stated, “Buyer demand remains strong and the limited inventory of resales continues to support the new home market.”
The Southern and Northeast regions showed particularly strong sales. Mangold attributes this to buyers seeking additional space for growing families and work-from-home arrangements. She also points out that companies are adjusting their expectations regarding hybrid and in-office work, which is likely to impact housing decisions in the future.
Although rising mortgage rates have contributed to the lack of existing home inventory and strengthened new home sales over the past year, Mangold believes that the possibility of a recession later in the year could affect this trend. She added, “Especially if mortgage rates decline and more resale inventory hits the market.”
The pipeline
As of the end of June, the seasonally adjusted inventory of new homes for sale was 432,000, representing a 7.4-month supply at the current sales rate. In comparison, the inventory of existing homes for sale was just over 1 million. Normally, the ratio of existing homes to new homes is 5 to 1, but recently it has been closer to 2 to 1, according to the National Association of Realtors.
George Ratiu, chief economist at Keeping Current Matters, a real estate insights and analytics company, points out that the restricted supply of existing homes benefits home builders this year. Ratiu stated, “Builders are responding to this shift by bringing slightly smaller homes to market, meeting lower price points, and extending financing incentives for cash-strapped first-time buyers or homeowners looking to trade up.” He also mentions that builders are grappling with higher materials and labor costs, which limits how much they can lower product prices.
Looking ahead, Ratiu anticipates continued improvement in new home supply, especially in markets with a high number of filed residential permits, such as Houston, Dallas, Atlanta, Charlotte, Austin, and Orlando. He believes that these markets, which have seen an influx of new residents due to strong local economies, warmer weather, affordable housing, and a lower cost of living, will continue to drive demand for new homes.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
