New Home Sales, commonly referred to as “new residential sales,” is an economic indicator that tracks the sale of newly constructed residences. It is extensively watched by investors since it is seen as a lagging signal of real estate market demand and, thus, a factor influencing mortgage rates. Household income, unemployment, and interest rates are all variables that influence it.

The United States Census Bureau releases two versions of the New Home Sales metric: a seasonally adjusted figure and an unadjusted one. The adjusted value is shown as a yearly total, whereas the unadjusted figure is presented as a monthly total. These numbers are provided for several areas and the entire nation.

New home sales are completed when a sales contract or deposit is signed or accepted. In any stage of construction, the home might be: not yet started, in the process of being built or fully finished. About 10% of the US housing market is made up of new house sales. Preliminary numbers for new single-family home sales are subject to major changes because they are mostly based on data from construction permits.

Recent Trends in New-Home Sales

June 2024 Stats

In June 2024, newly built home sales in the U.S. experienced a 0.6% decline, bringing the annual rate down to 617,000 units. According to the Commerce Department, this figure shows a slight drop from the revised number of 621,000 units in May. Analysts anticipated a rise to approximately 640,000 units, indicating that the market did not meet expectations. The sales data, seasonally adjusted, represents the number of homes that could be built over a year if current construction rates persisted.

Regional Variations

The report highlighted diverse regional performance: the Midwest and Northeast saw the most significant drops in new-home sales, while the South and West experienced slight increases. The fluctuations in sales across different regions thereof reflect localized market conditions influenced by factors such as employment rates, migration patterns, and regional economic health.

Yearly Comparison

When compared to June of the previous year, new-home sales were down 7.4%. This ongoing decline raises concerns among economists and industry stakeholders about the overall housing market's vitality.

High Prices and Elevated Mortgage Rates

A primary driver of the decline in new-home sales is the combination of high home prices and elevated mortgage rates. The median sales price of new homes rose to $417,300 in June, up from $407,100 the previous month. With rising costs, potential buyers are increasingly finding themselves priced out of the market, leaving many to either delay home purchases or opt for smaller, less expensive homes.

A sharp increase in mortgage rates—especially a 40 basis point rise noted in April 2024—has further strained affordability, with many buyers grappling with monthly payments that exceed their budgets.

Increased Inventory Levels

Interestingly, while home sales drooped, the inventory of new homes for sale rose by 2.2% between May and June. This increase brought the total number of new homes on the market to its highest level since October 2022. Many builders report that they have lowered prices and increased buyer incentives in response to the slumping sales. This is particularly important as it suggests a potential shift in the balance of supply and demand.

Builder Confidence

Builder confidence in the market remains at a seven-month low as they navigate a challenging landscape. Elevated inventory levels signal an urgent need for developers to adapt their strategies—slashing prices and providing incentives as they compete for buyers in a market experiencing dwindling demand.

Economic Expert Insights

Several economists have weighed in on the current state of new-home sales. Ian Shepherdson, chair of Pantheon Macroeconomics, noted that the earlier increase in sales observed in spring 2024 appears to have reversed, largely influenced by shifting mortgage rates. Furthermore, Stephen Stanley, chief economist at Santander U.S., commented on the low pace of combined existing and new home sales, highlighting the significant barriers posed by high prices and interest rates.

Future Outlook

Looking ahead, the residential real estate market remains uncertain. The current environment discourages buying, which could lead to a prolonged period of sluggish sales and increased inventory. Nevertheless, this situation might present opportunities for buyers willing to navigate the current landscape.

The recent declines might force builders to re-evaluate their pricing strategies more seriously, and they could potentially pivot to provide more affordable options to tap into the existing demand.

New Home Sales Trend [Previous Months]

Here's the region-wise tabular data for new home sales from March 2023 to March 2024. The units displayed are in thousands and are the seasonally adjusted annual rate. The data estimates only include new single-family residential structures. Sales of multi-family units are excluded from these statistics.

NORTHEAST: Connecticut, Maine, Massachusetts New Hampshire New Jersey New York Pennsylvania Rhode Island Vermont

MIDWEST: Illinois, Iowa, Indiana, Kansas, Michigan, Minnesota, Missouri, Nebraska North Dakota Wisconsin South Dakota Ohio

SOUTH: West Virginia, Virginia, Texas, Tennessee, South Carolina, Oklahoma, North Carolina, Mississippi, Maryland, Louisiana, Kentucky, Georgia, Florida, Alabama, Delaware, District of Columbia, Arkansas

WEST: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming

Month	Northeast	Midwest	South	West	Total
March 2024	46,000	79,000	391,000	177,000	693,000
Change Month over Month	24.32 %	-4.82 %	6.54 %	1.14 %	4.68 %
Change Year over Year	-29.23 %	11.27 %	1.30 %	9.94 %	1.46 %
Previous
February 2024	37,000	83,000	367,000	175,000	662,000
January 2024	43,000	70,000	358,000	190,000	661,000
December 2023	33,000	71,000	419,000	141,000	664,000
November 2023	33,000	70,000	337,000	150,000	590,000
October 2023	32,000	56,000	426,000	158,000	672,000
September 2023	49,000	67,000	456,000	187,000	759,000
August 2023	32,000	77,000	383,000	183,000	675,000
July 2023	30,000	93,000	414,000	202,000	739,000
June 2023	33,000	58,000	439,000	154,000	684,000
May 2023	32,000	72,000	425,000	181,000	710,000
April 2023	34,000	71,000	419,000	155,000	679,000
March 2023	65,000	71,000	386,000	161,000	683,000

 

Sources

The mere mention of a housing market correction sends shivers down the spines of many. Memories of the 2008 crash are still fresh, conjuring images of plummeting home values, foreclosures, and a financial crisis of epic proportions. But is a 2008 repeat on the horizon in 2024? Experts largely agree: the answer is no. Here's why the housing market today presents a different scenario, backed up by data sets and tables:

A Tale of Two Housing Markets: Supply & Demand

A critical difference between 2008 and 2024 lies in supply and demand. In 2008, an oversupply of homes flooded the market, driving prices down. The National Association of Realtors (NAR) reported a 9.4-month supply of existing homes in December 2007. Today, the situation is reversed.

Demand continues to outpace supply in many areas, influenced by factors like millennial homeownership trends and a general lack of new construction. The NAR reports a current national inventory of just 2.9 months, indicating a seller's market. This imbalance is a key factor in keeping prices stable despite economic fluctuations.

Metric	December 2007	February 2024
Months Supply of Existing Homes	9.4 months	2.9 months

Lending Standards: A Post-Crash Reformation

The subprime mortgage crisis, a key driver of the 2008 crash, was fueled by loose lending practices. In 2006, according to the Federal Reserve, a staggering 38% of all mortgages originated were subprime https://www.federalreserve.gov/. These risky loans were often issued to borrowers with weak credit or low down payments, making them more likely to default.

Today, lending standards are far stricter. Data from the Mortgage Bankers Association (MBA) shows that in 2023, the average credit score for a conventional mortgage application was 780, significantly higher than pre-crisis levels. This stricter vetting process ensures borrowers are more qualified to handle their mortgages, reducing the risk of defaults and foreclosures that plagued the 2008 market.

Metric	2006	2023
Share of Subprime Mortgages	38%	Negligible
Average Credit Score for Conventional Mortgages	Not Available	780

Beyond Regulations: The Role of Technology

The financial crisis of 2008 spurred regulatory reforms aimed at preventing similar meltdowns. These regulations ensure stricter lending practices and increased transparency in the housing market. Additionally, technological advancements have played a significant role in shaping the 2024 market.

The rise of online real estate platforms has empowered buyers and sellers with better access to information and market trends. This transparency allows buyers to make informed decisions and avoid bidding wars based on misinformation, unlike the speculative frenzy that contributed to the 2008 bubble.

A Different Kind of Growth: Not a Bubble

While some experts express concerns about a potential bubble due to rising prices and competitive bidding wars, the current market fundamentals differ significantly from 2008. The growth is driven by low mortgage rates and a genuine demand for housing, not by speculation or risky lending practices. Unlike the 2008 market, fueled by easy credit and unsustainable housing prices, the current demand is backed by strong economic fundamentals like low unemployment and rising wages. This creates a more sustainable foundation for long-term housing market growth.

The Road Ahead: Correction or Rebalancing?

Looking forward, experts predict a market correction with stabilizing home prices and potentially lower mortgage rates. This anticipated adjustment is a natural course correction for a maturing market, not a sign of an impending crash. Unlike 2008, where the correction was triggered by a burst speculative bubble, an adjustment in 2024 is more likely a return to a sustainable equilibrium point where supply and demand meet.

The Bottom Line: Lessons Learned

The housing market of 2024 is demonstrably different from the one that led to the 2008 crisis. Tighter regulations, a cautious lending environment, and a strong underlying demand for housing paint a more optimistic picture. While challenges may exist, such as potential interest rate hikes, the market is demonstrably on a more sustainable path, informed by the lessons learned from the past. Buyers and sellers can navigate this market with more confidence, thanks to stricter lending standards, increased transparency, and a more balanced foundation of supply and demand.

Beyond the Numbers: A Shift in Mindset

The differences between the 2024 housing market and the pre-crash market of 2008 go beyond just statistics and regulations. There's a fundamental shift in how people view homeownership. In 2008, housing was often seen as a quick path to wealth, with speculation and flipping being common practices. Today, homeownership is viewed with a longer-term perspective. People are buying homes to live in, creating a sense of stability and community.

This shift is reflected in several trends:

• Focus on affordability: While affordability concerns remain, particularly for first-time buyers, there's a greater emphasis on finding a home that fits within a sustainable budget, unlike the excessive borrowing that fueled the 2008 bubble.
• Increased caution: Buyers are more cautious and meticulous in their search. They're taking the time to understand the true cost of ownership and are less likely to be swayed by emotional bidding wars.
• Value beyond price: While location and amenities remain important, factors like walkability, green spaces, and a sense of community are increasingly valued by homebuyers. This reflects a desire for a home that enhances their overall quality of life, not just its resale value.

The Future of Housing: A More Balanced Market

Looking ahead, the housing market is likely to experience a period of adjustment. Rising interest rates could cool buyer demand, leading to a stabilization or even a slight decrease in home prices. However, a drastic crash like 2008 is highly unlikely given the strong underlying economic fundamentals and the more cautious approach to lending.

The future market is likely to be characterized by:

• Greater stability: With a more balanced supply and demand dynamic, price fluctuations are likely to be less dramatic, creating a more stable environment for both buyers and sellers.
• Focus on quality: As affordability becomes a bigger concern, the emphasis will shift towards well-built, energy-efficient homes that offer long-term value.
• Technological innovation: Technology will continue to play a major role, with advancements in virtual tours, online closing processes, and data-driven market analysis further streamlining the home buying and selling experience.

Therefore, all of the above shows that the housing market of 2024 is a product of the lessons learned from the 2008 crash. With stricter regulations, a more cautious approach by lenders and buyers, and a shift in mindset towards long-term value, the market is on a more sustainable path. While challenges may lie ahead, the future of housing appears more balanced and promising, with a focus on affordability, stability, and quality of life.

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New home sales are slumping due to rising costs. Will they rebound in 2024? Let's find out. The dream of homeownership has recently taken a hit as the U.S. housing market navigates a period of shifting dynamics. Sales of newly built homes dipped 4.7% in April compared to March, according to data released by the U.S. Census. This decline is even more pronounced on a year-over-year basis, with sales falling 7.7% from April 2023.

The culprit behind this slowdown is clear: rising interest rates. The monthly sales figures track contracts signed during the month, reflecting buyer decisions based on prevailing interest rates. In March, the average rate for a 30-year fixed mortgage hovered around 6%. By April, that rate had jumped to a staggering 7.5%, significantly impacting affordability.

Beyond rising interest rates, potential homebuyers face another hurdle: an increase in home prices. The median price of a new home in April reached $433,500, a 4% increase over April 2023. This can partly be explained by the type of homes currently selling – often on the higher end of the market. These buyers are typically less affected by interest rate fluctuations as they may be paying in cash.

Builders are grappling with this new reality. They're facing high costs for land, labor, and materials, making price reductions difficult. Some large builders have tried to ease the burden for buyers by offering to buy down mortgage rates.

Their sheer size allows them to absorb some of these costs. However, as Peter Boockvar, a CNBC contributor, points out, “the entire new build industry is selling new homes at a pace below the 5-year average.” This suggests these efforts may not be enough to completely offset the affordability challenges.

Challenges for Low- and Middle-Income Earners

The data paints a concerning picture for low- and middle-income earners. A new index launched by the National Association of Home Builders (NAHB) and Wells Fargo revealed that in the first quarter of 2024, 38% of a median household income nationally was required to afford the mortgage payment on a median-priced new single-family home. This number jumps to a staggering 77% for low-income families earning only 50% of the area's median income.

While there's a persistent shortage of homes on the market, driving prices up for both new and existing properties, simply building more houses isn't a silver bullet. While an increase in overall supply would undoubtedly help, it's important to consider the type of housing being built.

The current market landscape favors single-family homes, which tend to be more expensive than condos, townhouses, or multi-family units. Additionally, many new construction projects are located in suburbs or exurbs, further out from city centers.

This can be a barrier for low- and middle-income earners who may rely on public transportation or prefer a more walkable urban environment. Zoning regulations and lengthy permitting processes can also hinder the development of more affordable housing options in areas with high demand.

“The lack of housing units is the primary cause of growing housing affordability challenges,” says Robert Dietz, NAHB's chief economist. He urges policymakers to enact changes that would allow builders to construct more homes, such as streamlining permit approvals, investing in skilled labor training, and addressing issues in the building material supply chain.

Forecast for the Remainder of 2024:

Experts are divided on the exact trajectory of new home sales in 2024. Here are some conflicting forces at play:

• Potential Rise in Sales: Organizations like the National Association of Realtors (NAR) predict a slight increase in sales compared to 2023. This is based on the persistent shortage of homes on the market, which could still drive some buyers towards new construction.
• Headwinds from Affordability: However, the significant jump in interest rates and overall affordability concerns could dampen sales activity. If rates continue to climb or home prices rise further, it could push many potential buyers out of the market.

The Bottom Line: The forecast for new home sales in 2024 remains uncertain. It will likely depend on how interest rates fluctuate and how builders manage to address affordability concerns. Builders may need to offer incentives or shift their focus towards more affordable housing options to attract buyers in this changing market.

Navigating the New Homes Market

So, what does this mean for you if you're in the market for a new home? Be prepared to face a more competitive landscape with higher prices and interest rates. Carefully assess your budget and explore all your options. Don't be afraid to negotiate with builders and consider all the financial incentives they might offer. Remember, knowledge is power in this market, so do your research and be a well-informed buyer.

Here are some additional tips for navigating the current housing market:

• Get pre-approved for a mortgage: This will give you a clear picture of your budget and make you a more attractive buyer to sellers.
• Be flexible with your search criteria: If you're open to different locations, house sizes, or move-in timelines, you may find better deals.
• Consider a fixer-upper: You can potentially find a good deal on a home that needs some work, but be sure to factor in the cost of renovations.

By staying informed, being patient, and making smart decisions, you can still achieve your dream of homeownership in this evolving market.

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