While new home sales received a slight bounce in November from moderating mortgage rates, the housing market continues to struggle because of ongoing supply chain disruptions, elevated construction costs and challenging affordability conditions.
Sales of newly built, single-family homes in November increased 5.8 percent to a 640,000 seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. On a year-to-date basis, new home sales are down 15.2 percent.
“Declining mortgage rates during the second half of November, combined with builder sales incentives, lifted the pace of new home sales for the month,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Ga. “However, due to higher construction costs and ongoing supply-chain issues, the median price of a newly-built single-family home in November was $471,200, 9.5 percent higher than a year ago.”
“The impact of higher construction costs has made building entry-level homes particularly difficult, and this is where we see the greatest amount of pricing out for the housing market,” said NAHB Chief Economist Robert Dietz. “In November 2021, 13 percent of new home sales were priced below $300,000. That share has now fallen to 7 percent.”
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 November reading of 640,000 units is the number of homes that would sell if this pace continued for the next 12 months.
New single-family home inventory remained elevated at an 8.6 months’ supply (of varying stages of construction). A measure near a 6 months’ supply is considered balanced. The count of homes available for sale, 461,000, is up 18.2 percent over last year.
A year ago, there were just 32,000 completed, ready to occupy homes available for sale. By November 2022, that number increased to 64,000, reflecting flagging demand and more standing inventory due to lower sales.
Regionally, on a year-to-date basis, new home sales fell in all four regions, down 3.6 percent in the Northeast, 22.3 percent in the Midwest, 13.1 percent in the South and 19.3 percent in the West.