Homebuilders must be feeling some whiplash, as new single-family home sales continued to yo-yo in October. After rebounding in August from a drop in July only to fall again in September, new home sales were back up in October, according to data released Wednesday by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau.
Sales of new single-family homes in September were at a seasonally adjusted annual rate of 632,000, up 7.5% from September, but down 5.8% compared to a year ago.
“Builders are offering incentives from price cuts and rate buydowns to upgrades,” Odeta Kushi, First American‘s deputy chief economist, said in a statement. “This month’s higher new-home sales number indicates some demand elasticity in the market for new homes.”
As the sales pace sped up the median sale price rose, jumping from $460,600 in September to $493,000 in October.
“Median prices increased even though a quarter of builders are now cutting prices. The increase in new-home prices reflects a shift in the mix of homes being sold, with fewer homes sold at lower prices points, thus the median price escalated, as well as higher construction costs are being passed on to the consumer,” Kushi said. “One year ago, 18% of new-home sales were priced below $300,000. In October 2022, only 12% of new-home sales were priced below $300,000. Looking back to pre-pandemic levels in October 2019, it was 43%.”
In addition, the amount of inventory also dropped to 470,000 homes for sale or the equivalent of a supply of 8.9 months at the current sales pace, down from 9.2 months of supply in September.
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Regionally, new home sales were up month over month in October in the Northeast (45.7%) and the South (16.0%), but down in the Midwest (34.2%) and the West (0.8%). Year over year, new home sales were down in three out of four regions with the Midwest recording the largest annual decline at 26.5%, and the Northeast recording an annual sum of 59.4%.
Despite the nationwide uptick in new home sales in October, homebuilder confidence continues to slide, hitting its lowest level since June 2012 in November, with a National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reading of just 33.
“The October report surprised to the upside, but leading indicators — permits and builder confidence — indicate ongoing weakness,” Kushi said. “There is a large number of started, but not-yet-completed, homes in the pipeline, so prices will need to adjust to make new homes attractive enough to entice more buyers.”