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Sales of newly built homes continued to increase in July, notching a 17-month high as inventory of existing homes remained scarce, according to data released Wednesday by the U.S. Census Bureau.
Sales of new single-family homes rose 4.4 percent in July to a seasonally adjusted annual rate of 714,000, a whopping 31.5 percent increase from July 2022 as the supply of pre-existing homes continues to drop. Analysts would have to flip back to February 2022 to find sales at a similar level, according to Census data.
“Builders are benefitting from the lack of resale inventory,” First American Deputy Chief Economist Odeta Kushi said in a statement. “Existing homeowners don’t have to sell, and by not selling, they continue to gain the utility of shelter. But a builder will do what’s necessary to sell their inventory, including offer incentives.”
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The median sale price for a newly built home dropped approximately 9 percent from a year prior to $436,700, illustrating the concessions and discounts offered by some builders looking to offload inventory and marking the fourth month in a row that new home prices have declined annually.
“New home prices have been declining year over year for the past four months,” Bright MLS Chief Economist Lisa Sturtevant said in a statement. “Some homebuilders have edged prices down slightly, but builders also are increasingly offering concessions, builder financing, or upgrades to help entice buyers.”
The seasonally adjusted estimate of newly built homes available at the end of July was 437,000, representing a supply of 7.3 months at the current sales rate compared to just 3.3 months of supply for existing homes.
While demand for newly built homes has stayed strong over the past few months, multiple experts predicted a slowdown in the sector would come soon as mortgage rates north of 7 percent edge out more buyers. Rates sat at 6.7 percent through most of July.
“It is hard for homebuilders to pivot quickly to adapt to changing market conditions, as the development pipeline can be months or even years. There is no doubt that there is still a persistent, long-term housing shortfall in the U.S.,” Sturtevant said. “However, in the near term, a lull in demand brought on by 7 percent mortgage rates could mean that builders will see less traffic and more empty model homes in the latter half of 2023.”
