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New home sales surged 20 percent from a year ago during May as homebuyers continued to seek out newly built homes in inventory-starved markets.
According to data released Tuesday by the U.S. Census Bureau, sales of newly built single-family homes were at a seasonally adjusted rate of 763,000 during May 2023 — 20 percent higher than the levels seen in May 2022 and a 12.2 percent jump from April.
Nicole Bachaud | Zillow
“This spring shopping season has buyers searching for listings and affordability — both of which can be found in new construction — with many builders offering incentives and fresh inventory,” Zillow Senior Economist Nicole Bachaud said in a statement. “This has brought a resurgence to the new construction industry with sales rising and home builder confidence climbing.”
Indeed, June saw builder confidence move into positive territory for the first time in 11 months as homebuilders found their wares met with solid demand again.
Robert Dietz | National Association of Home Builders
A statement from National Association of Home Builders Chief Economist Robert Dietz adds “The lack of resale homes available for sale, at just a three months’ supply, is supporting demand for newly built homes. New home inventory was 31% of total inventory in May. Historically it is typically 10% to 15%.”
The median sale price of new homes sold in May was $416,300 — down from the May 2022 median price of $449,000. The average sale price was $487,300, a decrease from the May 2022 average of $511,400.
One economist attributed the slowdown in pricing to a rise in completed homes. “The surge in completed homes means builders are pricing them to sell: In May, 48 percent of new homes sold for less than $400,000; a year earlier, it was 39 percent,” NerdWallet home and mortgage expert Holden Lewis said in a statement.
The increased demand for newly built homes comes amid the mortgage-rate-induced stalemate depriving the housing market of new inventory.
Over 90 percent of homeowners with mortgages have a rate below 6 percent, while more than 80 percent enjoy a rate below 5 percent. The average 30-year fixed mortgage rate was 6.43 percent in May, up from 5.23 a year earlier and the record low of 2.65 percent seen in 2021.
Homeowners with low mortgage rates have proven unwilling to list their homes and contend with 20-year high mortgage rates unless they absolutely have to, resulting in the lowest inventory levels seen in a decade.
