With too-few existing homes listed for sale, more homebuyers opted for new construction, which saw sales rise 12.3% month-to-month and 33.9% year-to-year.
By Kerry Smith
WASHINGTON, Oct. 25 – Despite mortgage rates at a 23-year high, new home sales posted a double-digit percentage gain in September, rising 12.3%. The National Association of Home Builders (NAHB) says the surge came about mainly because homebuyer had too few choices in the existing home market.
Newly built, single-family home sales in September rose to a 759,000 seasonally adjusted annual rate, according to released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
But the biggest surge came in year-to-year comparisons, where the pace of new home sales was up 33.9%.
“While more buyers are turning to new construction because of a lack of existing inventory, higher mortgage rates approaching 8% are expected to slow the market in the coming months as affordability conditions continue to worsen,” says Alicia Huey, chairman of NAHB. “Higher interest rates not only raise the cost of housing for buyers, but for builders as well because of increased costs for financing construction loans.”
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the September reading of 759,000 units is the number of homes that would sell if this pace continued for the next 12 months.
“New home sales surged in September largely due to the low existing home inventory rate, as many homeowners with attractive mortgage rates are electing to stay put rather than purchase a move-up home with a much higher interest rate,” says Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis.
“To compensate for this high interest rate environment, more builders are building smaller homes, which has resulted in a decline in the median new home price,” she adds.
New single-family home inventory in September was 435,000, down 5.4% year-to-year. It represents a 6.9-months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced. Completed, ready-to-occupy inventory is up 39.6% from a year ago, however that inventory type remains just 17% of total new home inventory.
The median new home sale price in September was $418,800, down 3.3% from last month and down 12.3% year-to-year. The price drop comes from builder’s focusing on smaller homes and an uptick in builder incentives offered to buyers.
Regionally, on a year-to-date basis, new home sales are up in all four regions of the country:
*12.8% in the Northeast
*0.5% in the Midwest
*5.4% in the South
*2.5% in the West
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