April 2023 New Home Sales
What Happened This Month:
New home sales climbed in April, increasing 4.1% from March’s revised rate to an annual rate of 683,000 new home sales. This month’s level is a sizable 11.8% compared to last April, the highest level since March 2022. New home sales picked up the most in the South, climbing 17.8% compared to last month and 23.4% compared to last April. The Midwest also saw an increase in new home sales, which climbed 11.8% compared to March and 20.6% year-over-year. The Northeast and West saw new home sales fall 58.6% and 9.1%, respectively, compared to March, setting them back 46.7% and 2.8% compared to last year.
What Does this Mean for the Home Shoppers:
This spring’s market has been a story of persistent unaffordability and cooled seller activity. As a result, an increasing number of buyers have turned to new construction to find highly sought-after inventory and flexibility. As current homeowners stay ‘locked-in’ to their existing low mortgage rate, buyers search for favorably priced options from builders. The median new home sale price fell to $420,800, 8.2% lower than last April, and the lowest new home sale price since December 2021. Builder sentiment continued climbing in April and May, reaching an index of 50, the highest level since July 2022 as builders enjoy elevated demand for newly built or soon-to-be-built homes.
Mortgage rates have largely remained between 6% and 7% since September 2022, providing home shoppers some stable ground for making housing decisions. Though slowing, overall price growth remains positive relative to last year, meaning many buyers are still priced out of today’s housing market. For those still in the market, new construction options are an increasingly attractive prospect, especially with falling new home sales prices. Newly built homes will likely continue to rise in popularity until the market offers enough upside, whether in terms of options or affordability, to encourage existing homeowners to list their home for sale.
Sales Pick Up and Builders Are Managing Supply:
The stock of new homes for sale at the end of April was roughly flat both month-over-month and year-over-year. Considering the climbing pace of sale and the sustained number of homes available, the market boasted 7.6 month’s supply of new homes in April, down from 7.9 months’ supply in March as new construction hurried to keep up with demand. However, though the number of new homes for sale remains stable, 24% of new construction for sale at the end of April had not yet been started and 61% was under construction. This means that though buyers are increasingly finding suitable options in the newly-built home segment, many of these homes are not yet completed. However, the share of completed new homes for sale is more than double last April’s share, and 6 percentage points higher than in April 2021, meaning today’s buyers are seeing more move-in-ready new construction than in the last two years. Additionally, the increased pace of new construction could mean buyers see more completed new home inventory soon.
