New home sales slide in June
After gaining steam a month ago, new home sales retreated in June, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported this morning.
According to the latest New Monthly Residential Sales report, new home sales fell 2.5% to a seasonally adjusted annual rate of 697,000 from the revised May rate of 715,000.
But the latest rate is 23.8% above the June 2022 estimate of 563,000.
Last month’s report saw new home sales charge forward by 12.2% while increasing 20% on a year-over-year basis.
“Rising mortgage rates in June, coupled with elevated construction costs and supply chain issues for electrical transformers, acted as headwinds on the new home sales market,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala.
The median sales price of new houses sold in June 2023 was $415,400, slipping slightly from a median price of $417,300 in May. The average sales price in June was $494,700, moving upward by 1.2% compared to an average price of $488,700 in the prior month.
“Demand for new homes cooled in June primarily due to a more than quarter-point rise in mortgage rates over the previous month,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “However, the lack of existing inventory and the Federal Reserve nearing the end of its rate hikes signal that demand for new homes may rise in the coming quarters.”
At the end of June, the seasonally‐adjusted estimate of new houses for sale was 432,000. This represents a 7.4-month supply. In May, the figure stood at 429,000.
Existing-home sales fell 3.3% in June to a seasonally adjusted annual rate of 4.16 million in June.
Earlier this month, the National Association of Realtors reported that total housing inventory registered at the end of June was 1.08 million units, identical to May but down 13.6% from one year ago (1.25 million). Unsold inventory sits at a 3.1-month supply at the current sales pace, up from 3 months in May and 2.9 months in June 2022.
Here’s how new home sales performed in June 2023 on a regional basis:
- In the Northeast, new home sales jumped by 20.6% and soared by 141.2% on a year-over-year basis.
- The Midwest saw new home sales decline 28.4% in June and 13.1% on a year-over-year basis.
- New home sales in the South rose by 4.3% for the month and saw an increase of 21.4% compared to the same period a year ago.
- Sales in the West fell by nearly 14% but saw year-over-year growth of nearly 35%.
What builders reported in June
The monthly BTIG/HomeSphere home builder survey indicates that in June fewer builders reported year-over-year (YOY) increases in sales compared to May.
Only 27% of builders reported YOY increases in sales while 39% saw a decline compared to 34% and 39%, respectively, in May.
Traffic trends were static with 30% of builders reporting higher community traffic YOY while 34% saw a decline compared to 30% and 38%, respectively, in May.
BTIG analyst Carl Reichardt said survey results suggest that new home demand has flattened since spring. Sales comps are easing, so we had expected stronger results.
“We also note that the smaller private builders we survey tend to operate at higher price points relative to many larger public players who may have shifted to lower-end products in recent years,” Reichardt said.
Here are the key findings from the most recent BTIG/HomeSphere survey:
Sales trends slower and traffic remains consistent in May:
- 27% of builders reported higher YOY sales vs. 34% last month and 27% in June 2022. 39% saw a YOY decrease in orders vs. 39% last month and 51% for the same month last year. 30% reported an increase in YOY traffic vs. 30% last month. 34% saw a decline compared to 38% last month.
Sales and traffic relative to expectations weakened this month:
- 30% of respondents saw sales as better than expected vs. 37% last month, while 31% saw sales as worse than expected, vs. 26% last month. 32% saw better-than-expected traffic and 26% reported worse-than-expected traffic (compared to 35% and 23%, respectively, last month).
Builders pricing activity and the use of incentives remains mixed:
- 23% of builders raised some, most, or all base prices in June, from 33% last month.
- 15% cut some, most or all base prices vs. 19% last month.
- 22% of builders reported increasing some, most or all incentives vs. 27% last month, while only 2% reported decreasing some, most or all incentives vs. 7% last month.
