Sales fall in three of four regions; more than 60% of sales between $250,000 and $500,000.

By Manuel Gutierrez, Consulting Economist to NKBA
 

Unlike existing homes, whose sales exploded by 16% in September, sales of new home fell by 3.5% for the month to an annual rate of 959,000. Nonetheless, new home sales in September, combined with the previous two months, are at their highest levels since early 2007. Home sales are indeed booming.

Only one of the four U.S. regions bucked the September drop in home sales. Sales in the West rose by 3.8%, to an annual rate of 271,000 units. The region was responsible for just over a quarter, or 28%, of the nation’s September new home sales.

The largest decline was a steep 29% drop in the Northeast, to just 32,000 units for the month. Since the region represents just 3% of total new home sales, it does not factor strongly in the overall picture.

The Midwest and the South saw similar percentage declines of 4.1% and 4.7%, respectively. The 93,000 Midwest units represents just 10% of the U.S. total, while the South, at 563,000 units, equals the lion’s share of national new home sales, at 59%.

The chart above clearly shows that both the South and the West have more than recovered any home sales lost during the worst of the pandemic shutdown. New home sales in both these regions should remain strong through next year.

Stronger sales are in mid-priced homes

Selling prices for new homes have been trending upward. This is attributable not only to stronger demand for homes, which naturally will drive prices higher, but  because the size and amenities of those homes have increased.

The median selling price this year is 1.5% higher than in 2019, although the average (mean) price is actually down by 1%.

Sales have increased in almost all price ranges, with the exception of those under $250,000, which have lost significant share. At the turn of the century, 7 in 10 homes sold were in that lowest price range. Today, they account for only 1 in 5 homes sold (21%.)

Homes at all other price ranges have gained, but those between $250,000 and  $500,000 have increased the most. They accounted for less than 24% of new houses sold in 2002, but have catapulted to 63% of them today.

High-End Home Sales on the Rise

Of particular interest are sales of new high-end homes, which are defined as having sold for at least $500,000.

In the third quarter of this year, a total of 39,000 homes were sold within this price range, an increase of 8,000 homes from the same quarter last year. As seen in the chart below, high-end home sales have increased steadily since 2010, when the housing market started recovering from the decimation caused by the 2007-2009 recession.

However, as a portion of all homes sold, high-end new homes’ share fell to 16% in the third quarter this year. This is the second year of declines which, as noted  above, was caused by the shift toward mid-priced homes.