New home sales slowed in September but still beat forecasts
Builders are offering financing incentives and cutting prices to entice buyers, which has helped the sector avoid a more pronounced dropoff in sales.
Sales of newly built homes fell in September, but the slowdown was less dramatic than some analysts had feared as buyers took advantage of rate buydowns and price cuts.
September sales came in at an annualized rate of 676,000, according to the U.S. Census Bureau. That's down 0.6% from August and down 5.3% compared to a year ago, when the annualized rate was 714,000.
Builders working hard to engage buyers: Forecasters were expecting an annualized rate of just 653,000 new home sales, given the rise in mortgage rates this summer. But a combination of price cuts, financing incentives and smaller, more affordable homes kept buyers in the market, according to Odeta Kushi, deputy chief economist at First American.
"That is helping sustain sales, but it also shows how hard builders are working to keep buyers engaged," Kushi said in an email.
Prices continue to lag behind existing homes: Kushi also noted that 51% of new homes sold for less than $400,000 in September, up from 46% a year earlier. It marked the seventh straight month that the median new home price was less than the median existing home price.
The median price for new homes sold last month was $400,400. That's down 3.9% compared to a year earlier. The median price for an existing home sold in September was $417,500, according to the National Association of Realtors.
Plenty of supply: New home inventory has remained steady even as construction has slowed. The U.S. Census estimates new home supply at 8.4 months, down a tick from 8.5 months in August but slightly higher than a year ago.
Combined with existing home inventory, the country's total housing supply sits at 5.2 months, putting it within the "balanced market" range, according to the National Association of Home Builders. During the housing boom of 2020 and 2021, combined inventory fell to about three months.
Since builders can't afford to keep their inventory off the market until conditions improve, that segment remains firmly in buyers market territory, according to Joel Berner, senior economist at Realtor.com.
"They can and are slowing down on the delivery of new homes, but there are still 111,000 completed homes for sale across the country for which builders are eagerly searching for buyers," Berner said.
Stark regional differences: While new home sales fell nationally in September, they were strong in two parts of the country. Sales jumped 28% in the Northeast compared to August and were up 21.4% in the West. In the Midwest, however, they fell 7.3% and were down 6.6% in the South.
Only the Northeast saw a year-over-year increase, with new home sales rising 10.3%.