June 2024 New Home Sales
What Happened This Month:
New home sales dipped 0.6% lower in June, dropping from May’s upwardly revised rate to 617,000 annual new home sales. New home sales were 7.4% below the June 2023 rate as mortgage rates, despite some easing, remained elevated near 7%. Still-high borrowing costs continued to zap buyer enthusiasm, even in the new construction segment, which has fared relatively well amid scarce existing inventory.
New home sales activity varied regionally in June. The annual rate of new home sales fell in the Northeast (-7.7%) and Midwest (-6.9%), but climbed on a monthly basis in the West (+1.4%) and the South (+0.3%). On an annual basis, new home sales climbed in the Midwest (+32.8%) and the West (+2.8%), but fell in the South (-12.2%) and the Northeast (-63.6%).
New Home Share of Inventory Leveling:
New home inventory continued to climb in June as new home stock was met with lackluster demand. Months’ supply of new home inventory climbed to 9.3 months, up from 7.7 months one year prior and 9.1 months in May. Despite building inventory, new home prices remained relatively flat year-over-year, dropping just $300 annually to $417,300.
Though new home inventory continues to climb, existing home stock has also picked up significantly. As a result, the new home share of homes for sale continues to level off, reaching the lowest share in two years.
But New Homes Are Less Likely to Be Move-in Ready :
Of the available new homes for sale at the end of March, 22% were not yet started, 58% were still under construction, and just 21% were completed. This means that though more new home inventory is available, buyers are not seeing fewer completed, move-in-ready homes than the data would initially suggest. However, though only roughly one-fifth of available new homes are completed, the share of completed homes for sale is at its highest level since June 2020. This signals an important shift in new homes for sale as inventory builds.
Buyer Activity Hinges on Improvements in Affordability:
Buyers continue to see growing for-sale inventory, both in the and new construction segments. However, building inventory has done little to stoke buyer demand as prices remain stubbornly high. Many buyers are holding off on jumping into the market, hoping to see lower mortgage rates or lower home prices later this year.