New home sales continue to outperform existing

New home sales continue to outperform existing

The U.S. Census Bureau released monthly home sales data on Monday. New and existing home sales started to slow a bit in October. Sales were down from 759K units sold in September to 679K units sold in October. Market experts indicated that any fall number above 650K is considered neutral, and this was in-line with seasonal expectations.

However, the key takeaway was that new home sales are actually outpacing existing. Inventory for existing home sales has remained tight while new home construction has continued to ramp up with more units coming into the market.

How is the housing market progressing in November?

Altos Research released its weekly housing market report, and the data is a bit of a surprise. New listings and inventory are up year-over-year. That’s not a surprise considering that last year saw a substantial drop in inventory and listings.

Where the surprise came in was in sales. There were 5% more contracts started this past week compared to where home sales were a year ago. This indicates that sales are no longer contracting, but starting to show growth.

Available home inventory has finally reached its peak for the fall and has started to recede. Available homes in the U.S. were down about 1% when comparing this past week to the previous week. This is normal for the season and will likely continue to draw down into the New Year. This is a typically seasonal trend. Peak did come a little later, so this could mean that the drop might not be as harsh as 2022.

Altos Research did state that their 2024 forecast indicates an increase in available homes. They don’t necessarily expect a flood, but there should be an increase in available options for the upcoming year.

Why are new homes playing a bigger role in the market?

Marketplace.org examined why homebuyers are moving towards new construction and away from existing homes. The answer is fairly simple.

First, new homes are as available as existing homes are, and some builders are offering incentives to help get their existing new home inventory. Daryl Fairweather, chief economist at Redfin stated, “Builders have very different incentives than existing homeowners, they don’t care what rates were a couple of years ago, they just want to get their inventory sold for the highest price the market supports.”

Second, new home prices are comparable to existing. Nitin Gupta, a real estate agent in the Dallas-Fort Worth area, said with prices and mortgage rates high across the board, people are thinking, “Okay, we may as well get a new home. Where you don’t have to worry about maintenance or repairs. And you’re getting the latest and greatest design and architecture and amenities.”