Sales decline as more first-time homebuyers get priced out of the market.
New home sales posted a double-digit decline in September after a short-lived rebound the month before.
Sales of new single-family houses in September plunged 10.9% to a 603,000 seasonally adjusted annual rate, according to newly released data by the Census Bureau. The decline followed a brief uptick in August (677,000) and was down 14.3% compared to 2021.
Kelly Mangold, principal at RCLCO Real Estate Consulting, noted a “mismatch between today’s elevated prices and buyers’ budgets, which has sidelined many buyers in the near term.”
“Motivated buyers who are able to stomach the rate increase or who may be buying in cash are encountering a much less competitive buying landscape than earlier this year,” she said. “It remains to be seen the extent to which product and pricing will adjust, but if rates continue to rise, it is likely that we will see the for-sale market continue to slow towards year’s end – and prices of homes will continue to adjust downward.
“This is all happening at a time when there remains a strong demographic demand for new for-sale homes due to millennials having children, pandemic increases in pet ownership, and the widespread adoption of hybrid/remote working.”
Mangold stressed that people’s need for more space indicates a significant pent-up demand for when conditions begin to improve.
The count of new single-family homes for sale stayed elevated at 462,000 units, up 23.2% year over year and represented a 9.2 months’ supply (of varying stages of construction). Of this total figure, only 56,000 of the new home inventory is completed and ready to occupy. The remaining have not started construction or are currently under construction.
“Builders continue to face lower buyer traffic due to declining affordability conditions as the housing downturn continues,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB). “Builder sentiment has declined for 10 consecutive months. The entry-level market in high-cost areas has been particularly affected, with growing numbers of first-time and first-generation buyers priced out of the market.”
Reflecting rising construction costs, the median sales price of new homes sold in September was $470,600 (up 13.9% from a year ago), and the average sales price was $517,700.
“However, NAHB surveys indicate that a quarter of builders are now cutting prices. Thus recent months’ price data reflects a composition change, with sales lost at the low end of the market pushing the median price higher,” the association said in a statement. “In September 2022, there were 20,000 sales priced below $300,000. In September 2021, sales in this price range totaled only 6,000.”