The median new home price in the United States hit a record high $408,800 in September. Census data for new home sales show the average price just off the record high at $451,700. The survey estimate for new home sales in September came in at a seasonally adjusted annual rate (SAAR) of 800,000 units. This was a 14 percent improvement from August, but still down 17.6 percent from the same time a year ago.
North Texas saw a 16 percent decline in new home contracts from the same time a year ago. Closed sales were down 40 percent as builders simply ran out of affordable homes to sell. NTREIS figures show median and average prices for new homes in North Texas hitting record highs last month. The median price of a new DFW home was up 18.1 percent to $374,901. The average price of a new home rose 17.2 percent to $435,901.
In truth builders would be selling even more homes if they had more affordable inventory available for sale. Sales are still sluggish with prices near record highs and interest rates trending higher. Rampant inflation and a general lack of affordability is putting a damper on robust demand for housing. After cooling for several months, some buyers have come back into the market. Some are probably hoping to buy before a continued rise in mortgage interest rates.
With the Fed expected to announce a taper of asset purchases next month asset prices are looking a bit wobbly. The central bank liquidity flows that fueled this massive ramp in the housing market during Covid are poised to reverse course. It remains to be seen how the housing market will react.
Home builders are sitting on a record amount of backlogged inventory. The seasonally adjusted headline figures showed 5.7 months of new home inventory in September. That’s still a very misleading picture of what’s really happening in market. The non-adjusted inventory numbers show 383,000 new homes available for sale. Of that total, a record 105,000 homes have not even started construction! That translates to 27.4 percent of the “inventory” supposedly available for sale.
There are still some buyers willing to go out on a limb and lock in these record high prices. The historical record suggests that’s probably a bad idea. Patience is probably a buyer’s best asset in this market. With 1.45 million housing units in the pipeline in the U.S. there will likely be better opportunities to buy a new home (certainly better inventory selection) as we head into next year. The manic ramp in asset prices facilitated by huge fiscal and monetary stimulus created an inflationary monster. We’re still in the early innings of the inevitable correction that comes with it.
The S&P Case-Shiller numbers for August showed U.S. home prices up a record 19.8 percent. The index for Dallas Texas was up an eye-popping 24.6 percent. Those numbers from Case-Shiller are lagged. The average percent of list received for home sales in the DFW area has declined for three consecutive months. In reality the deceleration in the housing market is already underway.
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