New home sales sank again in November despite cooling mortgage rates, according to data from the U.S. Census Bureau and the Department of Housing and Urban Development.
Sales fell by 12.2% from October to a seasonally adjusted annual rate of 590,000, well below the rate of 685,000 units predicted by economists.
This is the sharpest decline since April 2022.
November saw the beginning of a cool down that brought interest rates to the mid-6’s. But at the start of that process, rates were at their highest levels in more than two decades, nearing 8%.
New home sales were up only 1.4% year-over-year, a notable decline from the month prior’s 17.7% YOY increase. Lack of existing inventory pushed buyers to new construction, but in November most forewent purchases as rates worsened affordability.
There were 451,000 new homes for sale at the end of October, representing a 9.2-month supply at the current sales rate.
The median sales price of new houses sold in October 2023 was $434,700 — up by $30,000 from October — while the average sales price was $488,900.
Homebuilders understand the need for more affordable inventory. Just 16% of homes were affordable to the average American in 2023, a record low. But construction costs are keeping many new homes priced out of reach for the average American.
“While new construction has provided a welcome addition to the very low inventory, new homes tend to be priced higher than existing homes,” Lisa Sturtevant, chief economist of Bright Multiple Listing Service, told CNN. “High costs of land, materials, and labor all drive higher new home prices.”
But the new year may finally bring the light at the end of the tunnel for potential homebuyers. Redfin recently reported that pending home sales saw their smallest decline since March 2022 as new listings jumped by double-digits. More homes for sale and moderating interest rates may lead to a significant uptick in market activity.
Housing starts surged to a 6-month high in November, while housing construction rose across all regions.
Fannie Mae recently predicted that the single-family market bottomed out in Q4 2023 and will begin “a slow but meaningful recovery over the course of the next year.”