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.
The National Association of Home Builders reported that newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau demonstrated that sales of newly built, single-family homes in November increased 5.8% to a 640,000 seasonally adjusted annual rate.
“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 NAHB. “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% higher than a year ago.”
NAHB stated that on a year-to-date basis, new home sales are down 15.2%. 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), according to the data. A measure near a 6 months’ supply is considered balanced. The count of homes available for sale, 461,000, is up 18.2% over last year.
A year ago, data showed there were just 32,000 completed, ready to occupy homes available for sale. By November 2022, data showed that number increased to 64,000, reflecting flagging demand and more standing inventory due to lower sales.
Regionally, on a year-to-date basis, NAHB stated that new home sales fell in all four regions, down 3.6% in the Northeast, 22.3% in the Midwest, 13.1% in the South and 19.3% in the West.
“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% of new home sales were priced below $300,000. That share has now fallen to 7%.”