Buyers are increasingly are targeting new-home construction as they face a low inventory of existing homes. New-home sales in October are 41.5% higher than they were a year ago, the Commerce Department reported late last week.
“Buyer traffic remained strong in October even as the country’s attention was focused on the elections and policy issues going into 2021,” says Chuck Fowke, chairman of the National Association of Home Builders. “Mortgage rates remain low and builder confidence is at an all-time high indicating that demand remains steady and sales will remain solid.”
Sales of newly built single-family homes in October were down only 0.3% compared to September’s revised numbers. But even with the slight monthly decline, new-home sales remain significantly elevated this year.
According to the NAHB’s data, “the gap between construction and sales was at an all-time high in early fall,” says Robert Dietz, the NAHB’s chief economist. “Thus, the NAHB forecast contains an acceleration in single-family starts and some slowing of the pace of growth for new homes sales to allow a catch up. Demand remains strong as home buyers seek out lower density markets as part of the suburban shift.”
The median sales price of a new home in October was $330,600. For comparison, a year earlier, the median sales price was $322,400.
Inventories remain tight at a 3.3-month supply at the current sales pace. Despite high buyer demand, inventories of new single-family homes is 13.4% lower than a year ago. Homebuilders point to ongoing labor and lot shortages and rising lumber prices as reasons new-home construction has slowed.
New-home sales are hottest in the Northeast and Midwest, where, on a year-to-date basis, sales are up 29.9% and 29.8%, respectively. New-home sales on a year-to-date basis are also up by 20.1% in the West and by 18.5% in the South.