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Friday, February 24, 2023

New Home Sales Increase to 670,000 Annual Rate in January; New Home Average Prices Down 5.3% Year-over-year

by Calculated Risk on 2/24/2023 10:50:00 AM

Today, in the Calculated Risk Real Estate Newsletter: New Home Sales Increase to 670,000 Annual Rate in January

Brief excerpt:

And on prices, from the Census Bureau:
The median sales price of new houses sold in January 2023 was $427,500. The average sales price was $474,400.
The following graph shows the median and average new home prices. The average price in January 2023 was $474,400 down 5.3% year-over-year.  The median price was $427,500 down 0.7% year-over-year.   This suggests a year-over-year decrease in prices, although both the median and the average are impacted by the mix of homes sold.

Active Inventory...
This was for contracts signed in January when mortgage rates were lower - and builders were buying down rates. Mortgage rates increased again in February, and that will likely impact sales.

As previously discussed, the Census Bureau overestimates sales, and underestimates inventory when cancellation rates are rising, see: New Home Sales and Cancellations: Net vs Gross Sales. So, take the headline sales number with a large grain of salt - the actual negative impact on the homebuilders is greater than the headline number suggests (until cancellations start declining)!

This will reverse when cancellation rates start declining. When a previously cancelled home is resold, the home builder counts it as a sale, but the Census Bureau does not (since it was already counted).

There are a large number of homes under construction, and this suggests we will see a further sharp increase in completed inventory over the next several months - and that will keep pressure on new home prices.
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