New Home Sales Increase in October


By Danushka Nanayakkara-Skillington on November 23, 2022 • New home sales rebounded in October despite higher mortgage rates, likely due to low existing home inventory and builders using incentives to attract buyers to the new home market. The U.S. Department of Housing and Urban Development and the U.S. Census Bureau estimated sales of newly built, single-family homes in October at a 632,000 seasonally adjusted annual pace, which is a 7.5% increase over downwardly revised September rate of 588,000 and is 5.8% below the October 2021 estimate of 671,000. Sales-adjusted inventory levels are at an elevated 8.9 months’ supply in October. However, only 63,000 of the new home inventory is completed and ready to occupy. This count has been increasing in recent months and is up 75.0% compared to a year ago. Homes under construction accounts for 63.8% of the inventory. Moreover, sales are increasingly coming from homes that have not started construction, with that count up 13.7% year-over-year, not seasonally adjusted (NSA). The median sales price increased to $493,000 in October, up 8.2% compared to September and is up 15.4% compared to a year ago. In October there were 23,000 homes that were priced above $500,000 compared to 17,000 a year ago. Nationally, on a year-to-date basis, new home sales are down 14.2% for the first ten months of 2022. Regionally, on a year-to-date basis, new home sales fell in all four regions, down 4.8% in the Northeast, 22.0% in the Midwest, 11.8% in the South, and 17.9% in the West. Related ‹ Small Increase for Missing Middle MultifamilyTags: economics, home building, housing, new home sales, sales, single-family

New Home Sales Increase in October2022-11-23T11:19:34-06:00

97% Built-for-Rent Multifamily Construction Share


By Robert Dietz on November 22, 2022 • According to NAHB analysis of quarterly Census data, the count of multifamily, for-rent housing starts remained elevated during the third quarter of 2022. At 141,000 units started, this was the largest quarter for rental multifamily construction since the second quarter of 1986. The market share of rental units of multifamily construction starts increased to 97% as the already small condo market retreated on higher interest rates. In contrast, the historical low share of 47% was set during the third quarter of 2005, during the condo building boom. An average share of 80% was registered during the 1980-2002 period. For the third quarter, there were just 4,000 multifamily condo construction starts. This is just half the total from a year ago. An elevated rental share of multifamily construction is holding typical apartment size below levels seen during the pre-Great Recession period. According to third quarter 2022 data, the average square footage of multifamily construction starts ticked up to 1,092. The median declined to 998 square feet. Related ‹ New Single-Family Home Size Trending LowerTags: economics, home building, housing, mfbfr, multifamily, multifamily size

97% Built-for-Rent Multifamily Construction Share2022-11-22T10:20:33-06:00

Flat Readings for Single-Family Built-for-Rent


Single-family built-for-rent construction leveled off during the third quarter of 2022 as the overall housing market slowed. This occurred after an exceptionally strong second quarter for rental housing production. According to NAHB’s analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were approximately 16,000 single-family built-for-rent (SFBFR) starts during the third quarter of 2022. This is 6% lower compared to the third quarter 2021 total. Over the last four quarters, 68,000 such homes began construction, which is a 42% increase compared to the 48,000 estimated SFBFR starts in the prior four quarters. The SFBFR market is a source of inventory amid challenges over housing affordability and downpayment requirements in the for-sale market, particularly during a period when a growing number of people want more space and a single-family structure. Single-family built-for-rent construction differs in terms of structural characteristics compared to other newly-built single-family homes, particularly with respect to home size. Given the relatively small size of this market segment, the quarter-to-quarter movements typically are not statistically significant. The current four-quarter moving average of market share (6%) is nonetheless higher than the historical average of 2.7% (1992-2012) and sets a data series high as this submarket expands. Importantly, as measured for this analysis, the estimates noted above only include homes built and held by the builder for rental purposes. The estimates exclude homes that are sold to another party for rental purposes, which NAHB estimates may represent another five percent or higher of single-family starts based on industry surveys. Indeed, the Census data notes an elevated share of single-family homes built as condos (non-fee simple), with this share averaging 4% over recent quarters. Some, but not all, of these homes will be used for rental purposes. Additionally, it is theoretically possible some single-family built-for-rent units are being counted in multifamily starts, as a form of “horizontal multifamily,” given these units are often built on single plat of land. However, spot checks by NAHB with permitting offices indicate no evidence of this data issue occurring at scale thus far. With the onset of the Great Recession and declines for the homeownership rate, the share of built-for-rent homes increased in the years after the recession. While the market share of SFBFR homes is small, it has clearly been trending higher. As more households seek lower density neighborhoods and single-family residences, a growing number will do so from the perspective of renting. This will be particularly true as mortgage interest rates remain elevated and increase. Thus, the SFBFR market will expand in the quarters ahead. Related ‹ Multifamily Developer Confidence Declines Significantly in the Third QuarterTags: economics, home building, housing, SFBFR, single family built for rent, single-family

Flat Readings for Single-Family Built-for-Rent2022-11-17T11:19:57-06:00

Credit Conditions for Builders and Developers Continue to Worsen


During the third quarter of 2022, credit continued to become less available and generally more costly on loans for Acquisition, Development & Construction (AD&C) according to NAHB’s Survey on AD&C Financing. To analyze credit availability, responses from the NAHB survey are used to construct a net easing index, similar to the net easing index based on the Federal Reserve’s survey of senior loan officers (SLOOS).  In the third quarter of 2022, both the NAHB and Fed indices were negative, indicating tightening credit conditions.  This was the third consecutive quarter during which indices from both surveys indicated tighter credit.  Moreover, both indices were more negative in the third quarter than they had been in the second, and far more negative than they had been in the first.  In the first quarter of the year, the NAHB net easing index stood at -2.3 before declining to -21.0 in the second quarter and  -36.0 in the third.  Similarly, the Fed net easing index was -4.7 in the first quarter of 2022, but subsequently fell to -48.4 in the second quarter and -57.6 in the third.  In short, the tightening of credit conditions for builders and developers is becoming more widespread. According to the NAHB survey, the most common ways in which lenders tightened in the third quarter were by increasing the interest rate on the loans (cited by 74 percent of the builders and developers who reported tighter credit conditions), reducing amount they are willing to lend (60 percent) and lowering the allowable Loan-to-Value or Loan-to-Cost ratio (46 percent). Meanwhile, the average effective rate (based on rate of return to the lender over the assumed life of the loan taking both the contract interest rate and initial fee into account) increased on three of the four categories of loans tracked in the AD&C Survey: from 9.55 to 9.67 percent on loans for land development, from 8.48 to 9.95 percent on loans for speculative single-family construction, and from 8.63 to 10.76 percent on loans for pre-sold single-family construction. These increases were due to increases in both the contract interest rate and the initial points charged on the loans.  The average contract rate increased from 6.27 to 6.42 percent on loans for land development, from 5.39 to 6.16 percent on loans for speculative single-family construction, and from 5.24 to 5.85 percent on loans for pre-sold single-family construction.  Similarly, average points increased from 0.90 to 0.93 percent on loans for land development, from 0.63 to 0.76 percent on loans speculative single-family construction, and from 0.59 to 0.89 percent on loans for pre-sold single-family construction. On the fourth category of loans in the AD&C survey (for pure land acquisition) the average effective rate declined slightly, from 8.19 percent to 7.97 percent.  Again, this was due to a combined effect of the contract rate and points on the loans moving in the same direction.  The average contract rate on land acquisition loans declined from 6.16 to 6.09 percent, while the average points declined from 0.86 to 0.79 percent. These generally worsening credit conditions are contributing to the weakness in builder confidence reported by NAHB earlier today.  Additional detail on current credit conditions for builders and developers is available on NAHB’s AD&C Financing Survey web page. Related ‹ Builder Confidence Declines for 11 Consecutive Months as Housing Weakness ContinuesTags: ad&c lending, ad&c loans, ADC, construciton loans, construction lending, credit conditions, economics, home building, housing, interest rates, lending

Credit Conditions for Builders and Developers Continue to Worsen2022-11-16T12:17:02-06:00

Single-Family Permits Decline in September 2022


Over the first nine months of 2022, the total number of single-family permits issued year-to-date (YTD) nationwide reached 800,424. On a year-over-year (YoY) basis, this is 7.4% below the September 2021 level of 864,184. Year-to-date ending in September, single-family permits declined in all four regions. The South posted a modest decline of 5.4%, while the Midwest region reported the steepest decline of 11.0%. The Northeast declined by 8.6% and the Western region reported an 10.0% decline in single-family permits during this time. On the other hand, multifamily permits posted increased in all four regions. Permits were 24.4% higher in the South, 22.5% higher in the Midwest, 11.3% higher in the West, and 6.0% higher in the Northeast. Between September 2021 YTD and September 2022 YTD, seven states saw growth in single-family permits issued. New Mexico recorded the highest growth rate during this time at 35.2% going from 4,432 permits to 5,993. Forty-three states and the District of Columbia reported a decline in single-family permits during this time with the District of Columbia posting the steepest decline of 36.9% declining from 328 permits to 207. The ten states issuing the highest number of single-family permits combined accounted for 63.7% of the total single-family permits issued. Year-to-date, ending in September, the total number of multifamily permits issued nationwide reached 516,955. This is 17.8% ahead of the September 2021 level of 438,700. Between September 2021 YTD and September 2022 YTD, 41 states and the District of Columbia recorded growth, while nine states recorded a decline in multifamily permits. Georgia led the way with a sharp rise (159.9%) in multifamily permits from 8,375 to 21,766 while Delaware had the largest decline of 75.1% from 962 to 240. The ten states issuing the highest number of multifamily permits combined accounted for 63.5% of the multifamily permits issued. At the local level, below are the top ten metro areas that issued the highest number of single-family permits. Metropolitan Statistical Area Single-Family Permits: Sep-22 (Units #YTD, NSA) Houston-The Woodlands-Sugar Land, TX                                                                                          39,590 Dallas-Fort Worth-Arlington, TX                                                                                          36,445 Phoenix-Mesa-Scottsdale, AZ                                                                                          23,399 Atlanta-Sandy Springs-Roswell, GA                                                                                          21,743 Austin-Round Rock, TX                                                                                          18,320 Charlotte-Concord-Gastonia, NC-SC                                                                                          15,496 Orlando-Kissimmee-Sanford, FL                                                                                          13,017 Nashville-Davidson–Murfreesboro–Franklin, TN                                                                                          12,781 Tampa-St. Petersburg-Clearwater, FL                                                                                          12,639 Jacksonville, FL                                                                                          11,395 For multifamily permits, below are the top ten local areas that issued the highest number of permits.  Metropolitan Statistical Area  Multifamily Permits: Sep-22 (Units #YTD, NSA) New York-Newark-Jersey City, NY-NJ-PA                                                                                        38,978 Dallas-Fort Worth-Arlington, TX                                                                                        24,071 Houston-The Woodlands-Sugar Land, TX                                                                                        21,070 Austin-Round Rock, TX                                                                                        18,682 Los Angeles-Long Beach-Anaheim, CA                                                                                        16,008 Washington-Arlington-Alexandria, DC-VA-MD-WV                                                                                        15,484 Seattle-Tacoma-Bellevue, WA                                                                                        15,208 Atlanta-Sandy Springs-Roswell, GA                                                                                        14,831 Phoenix-Mesa-Scottsdale, AZ                                                                                        13,816 Minneapolis-St. Paul-Bloomington, MN-WI                                                                                        12,617   Related ‹ Patios Continue to Substitute for Decks on New HomesTags: home building, multifamily, single-family, state and local markets, state permits

Single-Family Permits Decline in September 20222022-11-15T09:18:27-06:00

Patios Continue to Substitute for Decks on New Homes


As a previous post has shown, the share of new homes with patios increased for the sixth year in a row in 2021, to a post-2004 high of 63.0 percent  At the same time, the share with decks was trending in the opposite direction, declining for the fifth year in a row to a post-2004 low.  Of the roughly 1.1 million single-family homes started in 2021, only 17.5 percent included decks, according to NAHB tabulation of data from the Survey of Construction (SOC, conducted by the U.S. Census Bureau and partially funded by HUD).  As noted above, this is the lowest the new home deck percentage has been since the 2005 re-design of the SOC and indicates that, over time, patios and decks have functioned as substitutes for each other. The 2021 SOC data also indicate that decks and patios tend to function as substitutes for each other geographically.  Across the nine Census divisions, the correlation between the percentages of new homes with decks and patios was  -.81.  The share of new homes with decks was at its lowest in the West South Central and South Atlantic divisions (7 and 13 percent, respectively), the same two divisions where the share of new homes with patios was at its highest (over 70 percent). Decks on new homes nevertheless remain relatively popular in certain parts of the country.  For example, over 60 percent of new homes in New England came with decks in 2021, followed by 47 percent in the West North Central and 41 percent in the Middle Atlantic.  The New England and Middle Atlantic divisions are also the two divisions where patios on new homes are least common.  The West North Central, however, stands out as the one division where the shares of new homes with decks and patios are both reasonably high (around 45 percent), providing the best evidence that the negative correlation between decks and patios, while quite strong at -.81, is not perfect. The SOC data provide information about the number of new homes with decks, but not much detail beyond that.  However, considerable information about the type of decks on new homes is available from the Annual Builder Practices Survey (BPS) conducted by Home Innovation Research Labs. For the U.S. as a whole, the 2022 BPS report (based on homes built in 2021) shows that the average size of a deck on a new single-family home is 296 square feet.  Across Census divisions, the average deck size ranges from a low of about 253 square feet in the West North Central and South Atlantic divisions to 456 square feet in the West South Central. The latest BPS also shows that composite (a mixture of usually recycled wood fibers and plastic) has moved ahead of treated wood as the material used most often in new home decks. Related ‹ Inflation Shifts to Slowest Pace Since JanuaryTags: BPS, builder practices survey, composite, decks, economics, home building, housing, patios, SOC, survey of construction

Patios Continue to Substitute for Decks on New Homes2022-11-14T08:18:25-06:00

Concentration of Large Builders in Metropolitan Markets- Update (2021)


NAHB analysis of information published in Builder Magazine’s annual Local Leaders lists shows that large builders gained market share across all tiers on average from 2009 to 2021 in major housing markets; market concentration, as calculated with top four firms in a metropolitan statistical area (MSA), has also increased, but has leveled off over the last four years. Figure 1 shows the annual average of the four statistics produced by NAHB for this analysis, which showcases how these averages changed during the years following the Great Recession. For reference, the Great Recession occurred between December 2007 and June 2009 according to the National Bureau of Economic Research (NBER). All four percentages have increased since the trough of the Great Recession. The four firm concentration ratio started at 30.1% in 2009, peaked in 2020 at 43.7%, and declined slightly to 43.0% in 2021. The large national builders grew their market shares from 30.5% in 2009 to its current peak of 48.4% in 2021. The market share for all national builders went up from 33.8% in 2009 to its current peak of 53.6% in 2021. National and regional builders increased their collective market share on average from 37.3% in 2009 to its peak of 57.5% in 2021. NAHB calculated the percentage for all four statistics for the most recent year available (2021) by MSA. As an example, Figure 2 shows the MSAs in 2021 with the highest large national builder market shares. For reference, the average large national builder market share for all the analyzed MSAs in 2021 is 48.4%. Las Vegas-Henderson-Paradise, NV had the largest national builder share at 82.9% for 2021. This is unsurprisingly when analyzing the Local Leaders data for this MSA. Nine of the top 10 builders for Las Vegas-Henderson-Paradise, NV are classified as Tier 1 (i.e., 3,000+ closings); this share composition is true for Riverside-San Bernardino-Ontario, CA as well. NAHB also calculated the percentage change of these four statistics to understand how the COVID-19 pandemic affected each one and which companies “moved the needle” the most within MSAs. As an example, Figure 3 shows the large national builder market shares in 2019 and 2021 along with top five and bottom five MSAs by percent change. Colorado Springs, CO saw the largest positive percent change in large national builder market share, growing over five-fold from 3.7% in 2019 to 19.1% in 2021. All MSAs within the top five have a large national builder market share of less than 50%. Atlanta-Sandy Springs-Alpharetta, GA experienced the largest negative percent change, falling 12.2% from over 42.5% in 2019 to 37.3% in 2021. Interestingly, both MSAs in Colorado saw noticeable shifts among specific large national builders. Most of the increase in large national builder market share for Colorado Springs, CO came from the introduction of 2 firms in 2021 to the market: Clayton Properties (9.8%, or 407 closings) and D.R. Horton (3.0%, or 123 closings). M.D.C. Holdings previously had a strong presence within Colorado Springs, CO but fell out of the top ten starting in 2015; however, they have remerged in 2021, achieving a market share of 3.2%, or 131 closings, and ranked 8th. As for Greeley, CO, D.R. Horton (+5.6 percentage points to 16.7%, or 630 closings) and LGI Homes (+7.7 percentage points to 11.3%, or 425 closings) were the largest drivers of their increases in large national builder market shares. For a more detailed description of NAHB’s analysis of MSA builder market shares and concentration along with further insights, click on the link to access the full report where you will find MSA rankings for each of the four statistics, both for 2021 and percentage change from 2019 to 2021, and additional concentration analysis. Related ‹ Labor Market Softens in OctoberTags: builder concentration, COVID-19, economics, home building, housing, market share, Metropolitan Statistical Area, recession

Concentration of Large Builders in Metropolitan Markets- Update (2021)2022-11-07T08:18:28-06:00

An End to Large Rate Hikes from the Fed?


Continuing its tightening of financial conditions to bring the rate of inflation lower, the Federal Reserve’s monetary policy committee raised the federal funds target rate by 75 basis points, increasing that target to an upper bound of 4%. This marks the fourth consecutive meeting with an increase of 75 basis points and pushes the fed funds rate to a 15-year high. These supersized hikes were intended to move monetary policy more rapidly to restrictive policy rates. The Fed’s leadership has previously signaled they intend to hold these restrictive rates for a substantial period time, perhaps into 2024. Importantly, the November policy statement also contained hints of a pivot to a slower rate of hikes in the future. While noting that additional rate increases are required to bring inflation down to the Fed’s 2% target (with a higher than previously expected top rate), new messaging in the statement suggests a slowing of the size of the rate hikes. The Fed “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” This verbiage indicates the Fed will adjust its future actions based on expected lags with respect to already implemented tightening and will respond to additional signs of a slowing economy. This is a more data dependent and less forecast dependent policy outlook. In general, this policy adjustment is a positive development for housing because the current risk for Fed policy is of tightening too much and bringing on a more severe recession or a financial crisis. The Fed noted that economic activity is experiencing “modest growth.” Adding detail to this, in his press conference Chair Powell appropriately indicated the economy has “slowed significantly from last year’s rapid pace” and the housing market has “weakened significantly largely reflecting higher mortgage rates.” Powell also noted that tightening financial conditions are having negative impacts on the most interest rate sensitive sectors, specifically citing housing. Powell noted that the “housing market needs to get back into a balance of supply and demand.” Of course, the best way to do this is for policymakers to reduce the cost of constructing new single-family and multifamily housing. The Fed also sees labor market softening, with their projections from last month forecasting that the unemployment rate will increase to 4.4% in 2023. This is an optimistic forecast; NAHB projects a rate near 5% at the start of 2024. In September, the Fed’s “dot plot” indicated that the central bank expects the target for the federal funds rate would increase by 75 more basis points in November, and then 50 in December and concluding with 25 points at the start of 2023. This would take the federal funds top rate to near 4.8%. Today’s messaging from the Fed suggests that they are considering a higher terminal rate, perhaps above 5%. Powell also noted that the Fed needs to see a decisive set of data of slowing inflation to judge the appropriate level for the top fed funds rate. However, Powell refused to commit that the Fed is now biased against another 75 basis point increase. Combined with quantitative tightening from balance sheet reduction (in particular $35 billion of mortgage-backed securities (MBS) per month), the combination of past moves and expected, additional rate hikes represents a significant amount of monetary policy tightening over a short period of time. Given this intended policy stance, a hard landing with a mild economic recession is, in our view, highly likely. However, by 2025, the Fed is forecasting a return to a normalized rate of 2.5% for the federal funds rate. Among the clear signs of economic slowing are just about every housing indicator, including ten straight months of declines for home builder sentiment. Indeed, an open macro question is whether the economy experienced a recession during the first half of 2022, during which the economy posted two quarters of GDP declines. The missing element from the recession call: a rising unemployment rate, which is coming. Regardless, given declines for single-family permits, single-family starts, pending home sales, and rising sales cancellations rates, it is clear a housing industry recession is ongoing, with eventual large spillover impacts for the overall economy. In the meantime, housing’s shelter inflation readings have remained hot. Within the September CPI data, owners’ equivalent rent was up 6.7% compared to a year ago. In fact, over the last three months, this measure was increasing at an annualized rate of 8.9%. Rent was up 7.2% compared to a year ago. Housing is also central to the risk of the Fed raising rates too high for too long. Regardless of Fed actions, elevated CPI readings of shelter inflation will continue going forward because paid rents will take time to catch-up with prevailing market rents as renters renew existing leases. This lag means that CPI will show inflationary gains months after prevailing market rent growth has in fact cooled. The core PCE measure, the growth rate of which peaked in early 2022, is better indicator of inflation and suggests the current Fed outlook may now be entering too hawkish territory. It is important to note that there is not a direct connection between federal fund rate hikes and changes in long-term interest rates. During the last tightening cycle, the federal funds target rate increased from November 2015 (with a top rate of just 0.25%) to November 2018 (2.5%), a 225 basis point expansion. However, during this time mortgage interest rates increased by a proportionately smaller amount, rising from approximately 3.9% to just under 4.9%. The 30-year fixed mortgage rate, per Freddie Mac, is near 7% today but will move higher in the months ahead. Moreover, the spread between the 30-year fixed rate mortgage and the 10-year Treasury rate has expanded to approximately 300 basis points as of last week. Before 2020, this spread averaged a little more than 170 basis points. This elevated spread is a function of MBS bond sales as well as uncertainty related to housing market risks. Finally, the Fed has previously noted that inflation is elevated due to “supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.” While this verbiage may incorporate policy failures that have affected aggregate supply and demand, the Fed should explicitly acknowledge the role fiscal, trade and regulatory policy is having on the economy and inflation as well. Related ‹ Third Quarter of 2022 Homeownership Rate at 66%Tags: economics, FOMC, home building, housing, interest rates

An End to Large Rate Hikes from the Fed?2022-11-02T15:19:16-05:00

Construction Job Market Volatility


The count of open, unfilled jobs for the overall economy increased in September, rising from 10.3 million open positions to 10.71 million. This represents a small increase from a year ago (10.67 million). This increase occurs despite signs of a slowing economy amidst aggressive monetary policy tightening by the Fed. The hotter than expected labor market data pushed the 10-year Treasury rate back above 4%. Ideally, the count of open, unfilled positions slows to the 8 million range in the coming months as the Fed’s actions cool inflationary pressures for the U.S. economy. However, while higher interest rates are having an impact on the demand-side of the real economy, the ultimate solution for the labor shortage will not be found by slowing demand, but by recruiting, training and retaining skilled workers. The construction labor market saw an increase for job openings in September despite economic activity slowing, particularly for the housing market. The count of open construction jobs increased from 386,000 to 422,000 in September. This is actually higher than the estimate from a year ago (348,000). The labor shortage persists. The construction job openings rate moved higher, increasing to 5.2% in September after 4.8% in August. The data series high rate of 5.5% was recorded in April. The housing market remains underbuilt and requires additional labor, lots and lumber and building materials to add inventory. However, the market is slowing due to higher interest rates. Nonetheless, hiring in the construction sector remained solid at a 4.7% rate in September. The post-virus peak rate of hiring occurred in May 2020 (10.4%) as a post-covid rebound took hold in home building and remodeling. Consistent with slowing of building activity, construction sector layoffs increased to a 2.1% rate in September. In April 2020, the layoff rate was 10.8%. Since that time however, the sector layoff rate has been below 3%, with the exception of February 2021 due to weather effects. The number of layoffs in construction increased to 166,000, compared to 100,000 a year ago. The number of quits in construction in September (152,000) was lower relative to the measure a year ago (188,000). Looking forward, attracting skilled labor will remain a key objective for construction firms in the coming years. However, while a slowing housing market will take some pressure off tight labor markets, the long-term labor challenge will persist beyond an ongoing macro slowdown. Related ‹ More Prospective Buyers Are Actively Searching for a HomeSeptember Private Residential Spending Stays Flat ›Tags: economics, employment, home building, housing, JOLTS

Construction Job Market Volatility2022-11-01T21:19:24-05:00

New Home Sales Fall Back in September


Rising mortgage rates approaching 7% along with declining builder sentiment stemming from stubbornly high construction costs and weakening consumer demand pushed new-home sales down at a double-digit rate in September. Following a brief uptick in August, sales of newly built, single-family homes in September fell 10.9% to a 603,000 seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Builders continue to face lower buyer traffic due to declining affordability conditions as the housing downturn continues. New home sales are down 14.3% on a year-to-date basis compared to 2021. Moreover, sales are now down 1.9% on the same basis compared to 2019 levels that were prior to the Covid-related changes to interest rates. A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the September reading of 603,000 units is the number of homes that would sell if this pace continued for the next 12 months. Notably, the new home sales data does not incorporate cancellations, which according to NAHB survey data have more than doubled compared to a year ago. New single-family home inventory remained elevated at a 9.2 months’ supply (of varying stages of construction). A measure near a 6 months’ supply is considered balanced. The count of homes available for sale, 462,000, is up 23.2% over last year. Of this total, only 56,000 of the new home inventory is completed and ready to occupy. The remaining have not started construction or are currently under construction. Reflecting rising construction costs, the median new home price in August was $470,600, up 13.9% from a year ago. However, NAHB surveys indicate that a quarter of builders are now cutting prices, thus recent months’ price data reflects a composition change, with sales lost at the low end of the market pushing the median price higher. In September 2022, there were 20,000 sales priced below $300,000. In September 2021, sales in this price range totaled only 6,000. Regionally, on a year-to-date basis, new home sales fell in all four regions, down 8.1% in the Northeast, 21.2% in the Midwest, 12.1% in the South and 17.6% in the West. Related ‹ More Buyers Taking a Look at New ConstructionTags: economics, home building, housing, sales, single-family

New Home Sales Fall Back in September2022-10-26T19:15:08-05:00

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