Sales of new single-family homes rose 5.9% month over month in November to a seasonally adjusted annual rate of 664,000, compared to an upwardly revised level of 627,000 in October, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. Year over year, sales were up 8.7% from the November 2023 rate of 611,000.
“November’s rebound in new-home sales was softer than consensus expectations, partially because mortgage rates increased 38 basis points in November,” stated Odeta Kushi, Deputy Chief Economist at First American. “Higher-for-longer mortgage rates are a headwind to both builders and buyers — increasing buyers’ monthly mortgage payment and raising financing costs for builders.”
Despite these challenges, Kushi believes the new-home market will likely outperform the existing-home market. “Builders have inventory they need to sell, and the ability to offer incentives to coax buyers off the sidelines,” she added.
The median price of new homes sold during November fell to $402,600 from $425,600 in October. This decline also signifies movement from higher-priced segments to more affordable options within the market. Year over year, the median price was down from the $429,600 level of November 2023.
“The drop in median sales price of new homes is partly due to a significant increase in the number of homes sold for under $300,000,” Kushi explained. Notably, sales of homes priced under this threshold climbed from 13% of total sales in October to 25% by November, reflecting shifting buyer preferences and inventory strategies. Just a year ago, only 17% of homes sold stood below the $300,000 mark.
Overall, the months' supply of new homes for sale slid 3.3% to 8.9 months from 9.2 months in October, inching slightly higher from 8.8 months the previous year. This decrease suggests sellers are becoming more responsive to market demands as well, actively managing their available inventory.
The data presents a mixed picture as new home sales begin to recover. With interest rates still posing significant challenges for buyers, it remains to be seen how long this upward trend can continue amid fluctuated purchasing power and increased monthly payments.
Yet for builders, this period presents both challenges and opportunities. Kushi emphasized the importance of adapting to current market conditions and utilizing incentives where needed to attract potential homebuyers. “The ability to manage inventory and pricing effectively will be key for builder success,” she added.
Looking forward, the home market dynamics suggest possible continued recovery, but it will likely require sharp strategic adjustments by builders to align with the changing economic environment. Continued monitoring of mortgage trends, buyer behavior, and inventory levels will be pivotal for gauging the market's resilience as 2024 progresses.
