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New Home Sales exceed expectations again as existing home inventory continues to lag.

By Arnie Aurellano

While residential resales remain underwhelming, deals for new residences continue to surge, with sales for new single-family homes rising to a 13-month high in April.

The most recent numbers released jointly from the U.S. Census Bureau and the Department of Housing and Urban Development revealed new home sales at a seasonally adjusted annual rate of 683,000. That’s up 4.1% from March’s revised rate of 656,000 units, as well as 11.8% above the 611,000-unit rate from April 2022.

Transaction count surpassed economist expectations, with a Reuters poll of industry experts predicting April new home sales at 665,000 units.

The new home market continues to be a beneficiary of incredibly short supply on the existing home side. The National Association of Realtors recently reported that existing homes have just a scant 2.9 months of supply at the current sales pace, and resale inventory is still 44% below pre-pandemic norms.

“New home inventory as a share of total home inventory in April reached nearly 29%,” observed Odeta Kushi, deputy chief economist at First American Financial Corp. “From 2000 until the pandemic, new homes on average made up about 11 percent of total inventory. When existing homes are hard to fine, new homes at the right price are a good substitute.”

Builders are still being proactive in encouraging movement via buyer incentives like discounts and points buydowns, helping push median home prices downward.

“New-home prices saw the largest annual decline since April 2020,” noted Kushi. “The median sales price of new homes sold in April 2023 was $420,800, down 8.2% from one year ago and down 7.7% from last month. Builders are offering incentives, including price reductions, to entice buyers.”

Builder confidence in the marketplace has grown by leaps and bounds of late as interested buyers searching for both supply and affordability have turned to the new home segment in increasing numbers.

“Big picture – there are interested buyers out there, but a limited inventory of homes for sale,” Kushi said. “The historical average for inventory turnover, the total supply of homes for sale as a percentage of occupied residential inventory, is approximately 2.5%, or 250 homes for sale out of every 10,000. In April, housing inventory was 1.2%, well below the historical norm.

“With existing homeowners not selling, buyers may turn to the new-home market and builders are in a unique position to do what’s necessary to move inventory and bolster sales.”