Key Takeaways:

  • The number of homes sold that have not been started is at record 28 percent
  • Average new home prices rose 4.5 percent to $478,000 in October
  • High-end homes accounted for 30 percent of all homes sold, an all-time high

By Manuel Gutierrez, Consulting Economist to NKBA

 

Marking the sixth consecutive month of relatively flat sales, new homes sales rose a nominal 0.4% in October to a 745,000 unit annual rate, barely above September’s 742,000. (Figure 1).

A shortage of new home inventory continues to be a deterrent for higher sales volume.

According to a recent survey released by NAHB/Wells Fargo, over half of new home builders face labor shortages.

Currently, there are 389,000 new homes for sale at various  stages of completion. The number of homes sold that have not been started remains elevated compared to historical levels. October posted a record high of 28 percent (Figure 2), compared with an average 15 percent in the past. Since the pandemic began, the average number of homes sold that have not been started jumped to 24 percent.

Not surprisingly, homes for sale do not remain available for long. The percentage of completed homes remaining in inventory has remained under 10 percent for the last five months, significantly lower than past norm of 28 percent. At the same time, the majority of homes in inventory are under construction. In October, 62 percent of new home inventory was under construction, compared with an average of 56 percent at the beginning of 2000.

The South and the West accounted for an astonishing 85 percent of all new homes sold.

Home sales in the two largest U.S. regions, the South and the West, were nearly unchanged in October (Figure 3.) These two regions account for 85 percent of all new homes sold. New home sales in the South remained flat at 450,000, while sales in the West fell by 1.1 percent to 194,000. New home sales in the Midwest jumped 11 percent to 81,000, while sales in the Northeast sales fell 12 percent to 30,000.

Demand for housing, particularly new housing, remains strong. This, combined with the low inventory, has led to a continued rise in home prices. The average price of a new home in October rose to $478,000, 4.5 percent increase over the previous month.  The median home price rose a more modest 0.7 percent to $408,000 (Figure 4).

At the higher end of the market, sales continue to be strong. Defined as homes priced over $500,000, these homes accounted for 30 percent of all homes sold, an all-time record. Traditionally high-end homes have accounted for under 20 percent of homes sold in any given year.  In the third quarter of this year, a total of 55,000 homes priced at $500,000 or more were sold, compared with 44,000 in the same period last year.

Year-to-date, 162,000 high-end homes have been sold, up from 106,000 in 2020.

Insights Category – Housing, Sub-Category – Home Sales

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