Here are some interesting real estate activity updates:
- New single-family home sales increased 11.8% from a year ago.
- Sales in April rose in the South and Midwest but fell in the Northeast and West.
- The months’ supply of new homes (how long it would take to sell all the homes in inventory) is 7.6 months up significantly from 3.3 months early in the pandemic. This is in contrast to the market for existing homes which continues to struggle with an inventory problem often due to the difficulty of convincing current homeowners to give up the low fixed-rate mortgages they locked-in during the pandemic.
- The average price of new homes sold was $501,000, down 10.9% versus last year.
- While sales are on an upward trend recently and are now up 25.8% from the low in July of last year, they still remain well below the pandemic highs of 2020.
- The main issue with the US housing market has been declining affordability. With 30-year mortgage rates currently sitting near 7.0%, financing costs remain a headwind.
- Assuming a 20% down payment, the change in mortgage rates and home prices in just the past year amounts to a 13% increase in monthly payments on a new 30-year mortgage for the median new home.
- The median sales price of new homes has fallen by 15.3% from the peak late last year, which has helped sales activity begin to recover.
- One problem with assessing housing activity is that the Federal Reserve held interest rates artificially low for more than a decade. With rates now in a more normal range, the sticker shock on mortgage rates for potential buyers is very real. However, we have had strong housing markets with rates at current levels in the past, and homebuyers will eventually adjust, possibly by looking at lower priced homes.