Newly built homes a hot commodity for spring buyers
As existing home listings have fallen, the inventory of new homes has increased — and prices have dropped — making them an attractive option.
- Sales of new homes were up 11.8% in April compared to a year ago, and up more than 4% from March.
- In what is good news for buyers, the median price of new homes fell 8.2% year over year.
- Over a three-year period, inventory of new homes rose 30% while inventory of existing homes declined by half.
As potential sellers of existing homes remain on the sidelines, spring buyers are turning to newly built single-family homes.
Sales of new homes in April were up 4.1% compared to March and up 11.8% from a year ago, according to the latest data from the U.S. Census Bureau and HUD. The seasonally adjusted annual rate of new home sales is now at 683,000, up from 611,000 in April 2022.
In addition to greater availability, another attractive feature of new homes may be the price. According to the report, the median price of new homes sold in April was $420,800, down 8.2% compared to a year ago.
It's the first year-over-year drop in the median price since the summer of 2020 and is likely driven by falling prices in West Coast markets, said Bright MLS Chief Economist Lisa Sturtevant.
Sturtevant also noted that new home sales accounted for 14% of the total market. Typically, the new home market share is less than 10%.
"New homes are gaining traction in the market primarily because the inventory of existing homes is so low," Sturtevant said, noting that new-home inventory was up 30% compared to pre-pandemic levels in April 2019.
The supply of new homes now sits at 7.6 months, which is above what is considered a balanced market supply of 6 months.
"By contrast, the inventory of existing homes is currently less than half of what it was in 2019," said Sturtevant, "because so many people are 'locked in' to rock bottom mortgage rates, but the 'locked-in' effect should ease somewhat in the coming months. While rates are not expected to drop significantly, individuals and families who have been putting off moving will decide they have waited long enough."
Buyers aren't just looking at completed homes, said Robert Dietz, chief economist for the National Association of Home Builders. In April, sales of homes that have yet to be built were at the highest level in more than a year, and the number of available, not-yet-constructed homes was at the highest level since October.
The rise in new home sales appears to be improving homebuilders' confidence about the market. The latest confidence survey index from the NAHB rose five points to 50 between April and May, marking the fifth straight month of gains. It's the first time the confidence survey hit the midpoint of the index since July 2022.