For The Third Straight Month in a Row, New Home Sales Surged in the USA
In a real estate market plagued by a scarcity of homes for resale, sales of newly built homes in the US experienced a significant surge in May. This marks the third consecutive month of sales growth, with May’s increase being the most substantial since February 2022. The upward momentum in new home sales was observed nationwide, with the Northeast and West Coast leading the way. Home builders, who have been among the few offering inventory to prospective buyers, have contributed to the overall rise in new home sales.
According to the Commerce Department’s report on Tuesday, US new home sales rose by 12.2% in May, reaching an annual rate of 763,000 units. This figure, adjusted for seasonal variations, represents the projected number of homes that would be built in a year if the current pace is maintained. The exceeded expectations on Wall Street, as economists had predicted new home sales to reach 675,000 units in May. It is worth noting that April’s data was significantly revised, showing a rise to 680,000 units compared to the initially estimated 4.1% increase to 683,000 units.
Key details from the report reveal that the median sales price of new homes sold in May decreased to $416,400 compared to the previous month. Additionally, the supply of new homes for sale experienced an 11.8% decline between April and May, resulting in a 7-month supply. Regionally, both the Northeast and West regions demonstrated robust growth in new home sales, each recording approximately a 17% increase. Overall, new home sales have risen by 20% compared to the previous year.
Despite challenges such as low inventory and high mortgage rates impacting the housing market, home builders are thriving due to the appeal of new construction and the wider array of options it offers. Builder confidence in future sales remains high, driven by homeowners capitalizing on historically low mortgage rates secured during the pandemic. Notably, construction of new homes in the US surged by nearly 22% in May 2023.
Richard Moody, chief economist at Regions Financial Corporation, noted that favorable conditions exist for further sales growth, even in the face of higher mortgage interest rates. Moody emphasized the pent-up demand for home purchases resulting from a long period of under supply in the market. With inventories of existing homes at extremely low levels, more buyers are turning to the new homes market and designing their dream house plans, allowing builders to capitalize on the situation.
The National Association of Home Builders highlighted that new homes accounted for approximately 31% of the total inventory of homes in May. This figure represents a significant increase from the historical range of 10 to 15% of total inventory.
Here at Mark Stewart Home Design we are excited to see the housing market heading in the right direction again. If you’re a home builder looking for new house plans or a residential housing buyer, don’t hesitate to let us know how we can customize any of the stock house plans we’ve built in our collection, we’re happy to help.