In September, the annualized rate of new home sales in the United States reached 738,000 units, surpassing the anticipated 720,000 and the previous figure of 716,000 in August. This marked the highest level in over a year, driven by declining mortgage rates and increased buyer incentives from home builders.
The median price of new homes saw little change from a year ago, standing at $426,300, although it remains about 30% higher than at the end of 2019. Regionally, the Southern U.S. experienced its highest sales since April 2021, with improvements also noted in the Northeast.
Despite the recent uptick, the rebound in new home sales may be temporary, as mortgage rates have risen notably from their September low due to expectations of a gradual interest rate reduction by the Federal Reserve prompted by stronger employment and inflation data.
With housing affordability near historic lows, builders have been offering price discounts and mortgage rate subsidies to boost sales. PulteGroup Inc. (PHM, Financial), a major home builder, indicated in their quarterly earnings call that more incentives might be required later this year.
Following increased construction during the pandemic recovery, builders are now managing high inventory levels, with new home supply rising by 0.4% to the highest since 2008. The U.S. housing industry is looking forward to the crucial spring sales season, with builder confidence reaching a four-month peak partly due to expected future decreases in mortgage rates.
New home sales, comprising about 10% of U.S. home sales, serve as a leading indicator of the real estate market. However, these figures can be volatile month to month. Recently released data indicated that existing home sales dropped to an annualized 3.84 million units, a 14-year low, with a 3% year-over-year price increase and rising inventory. Buyers remain hopeful for further mortgage rate declines and more attractive home prices.
