Homebuilders, whose sentiment hit the midpoint mark of 50 earlier this month for the first-time since July 2022, have yet another reason to celebrate. The sales pace of new homes has also increased for the fifth consecutive month, according to data published on Tuesday by the U.S. Census Bureau and the Department of Housing and Urban Development (HUD).
In April, the sales pace of new homes rose 4.1% compared to March, hitting a seasonally adjusted annual rate of 683,000. On a year-over-year basis, new home sales were up 11.8%.
“Demand for newly built homes has been strong amidst the historically low inventory of existing homes for sale,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “This spring, new home sales are a more important part of the market than they would be in a more typical year. In April, new single-family home sales were about 14% of total home sales nationwide. Typically, sales of new single-family homes account for less than 10%.”
While the national inventory of single-family homes is down more than 50% compared to the level in early May 2019, the inventory of new homes for sale at the end of April (433,000 homes) is up 30% compared to the end of April 2019.
However, experts note that the existing home inventory trough won’t last forever.
“The inventory of existing homes is so low because so many people are “locked in” to rock bottom mortgage rates, but the “locked-in” effect should ease somewhat in the coming months,” Sturtevant said. “While rates are not expected to drop significantly, individuals and families who have been putting off moving will decide they have waited long enough. The uptick in new construction will help these more discretionary movers because now they see more options available.”
Although the sales pace increased in April, the median sales price fell slightly to $420,800, compared to $449,800 in March, as builders continued to utilize price drops and incentives to entice buyers.
“The backlog of new construction homes started in the last year or so is making its way online and most builders and projects are offering some incentives to offset affordability constraints,” Nicole Bachaud, Zillow’s senior economist, said in a statement. “This is helping to bump up new home sales at a time when existing home sales are sliding.”
Regionally, the sales pace was up in the Midwest (76,000 homes) and the South (443,000 homes) on a month-over-month basis, with the South recording the larger increase at 17.8%.
The West (140,000 homes) and the Northeast (24,000 homes) fell on a monthly basis, recording decreases of 9.1% and 58.6%, respectively.
On a yearly basis, the Northeast (-46.7%) and the West (-2.8%) again recorded drops, while the Midwest (20.6%) and the South (23.4%) recorded increases.