New home sales jump in April
According to recent data, sales of new single-family homes increased to a 13-month high in April 2023. Given the short supply of previously owned homes, new home sales saw a 4.1% increase month-over-month. The surge in new home sales outpaced expectations by a wide margin.
When asked about the latest numbers, senior economic advisor at Brean Capital, Conrad DeQuadros, said, “The evidence continues to accumulate that the housing market may have largely adjusted to the higher level of mortgage rates but the decline in the median home price is consistent with the hypothesis that home builders may be tailoring the construction of new homes towards first-time buyers.
What makes a real estate market hot?
Good schools, low crime, or good job opportunities are just a few of the must-haves that homebuyers looking to relocate wanted in the past, but right now, a hot housing market has one key aspect. Most homebuyers in the current market are looking for affordability.
In a recent market survey by Realtor.com, six of the top 10 metro areas in the US for home sales had a median listing price of under $400,000. Others, like Manchester, NH, have an affordability advantage over pricier, larger cities that are nearby. The median home sale price in Manchester in April was $522,000, which is above the national average of $430,000. However, it looks a lot more affordable compared to Boston and its median home price of over $800,000.
According to the experts, affordable metro areas are likely to remain hot, especially if they’re near a major city.
Can new home sales result in a lower mortgage rate?
Given the state of the mortgage market, a 5% mortgage rate would be considered a huge win for a homebuyer. A few experts think there’s a way to get there that homebuyers need to take advantage of.
In an interview with Yahoo! Finance, UBS homebuilders and building products analyst, John Lovallo, said, “So buyers out there today that are buying new homes are not paying 6.5% — the headline rate. They’re paying under 5% in most cases.”
For homebuyers, a 1-percentage point difference in mortgage rate can significantly lower their monthly payment. A 2-percentage point difference is even better, and that was on offer from Pulte Homes earlier in the year. “By offering lower rates, we are helping to make our homes more affordable for today’s consumers,” said Macey Kessler, Pulte Group’s corporate communications manager.
“What the builders have been able to do is to help buyers find that clearing price,” Lovallo said. “Whether it’s through incentives on lowering the actual price of the home or — what’s been happening more often — is buying down interest rates.”
Good opportunities can be had in the current market, homebuyers have to look a little harder, and find builders and sellers that are willing to cut a deal.
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