The Census Bureau reported new home sales for June at a seasonally adjusted annual rate of 631,000. This was below expectations, and a 5.3 percent decline from May. The previous three months were also revised lower. Compared to last June, new home sales were up a modest 2.4%. Surprisingly, the decline in new construction sales came despite lower median and average prices for new homes in June. The median price of $302,100 was $13,100 less than last year. The average price of $363,300 was $7300 lower.
It would appear that new home buyers are suffering from price fatigue and rampant home price inflation. Taken with the soft numbers for June existing home sales, that certainly seems to be the case. That wall of affordability which I have discussed has taken a bite out of sales volume. After the market close today, Meritage Homes reported a 12% rise in new home closings in the second quarter and a 5% increase in new home orders with “strong demand for entry-level homes”.
The distressing gap between existing home sales and new home sales was finally beginning to close this year. With a little luck, builders will wise up and continue building more affordable homes to continue closing the gap. If not, the gap could remain. Home inventory looks to have bottomed in many major U.S. markets, including the Dallas-Fort Worth real estate market. That will likely keep pressure on new home builders to meet the demand for affordable homes.
The unadjusted numbers for new home sales still show positive year-over-year growth. Barring further interest rate increases, new home sales still have room to grow…assuming the prices & payments are affordable. NTREIS data show that sales (actual closings) of new homes rose 5% compared to the same month last year, with median and average prices that were flat to lower than last year. Pending sales of new construction in North Texas are higher as well.