ACRE Commentary: New home sales slowed in April as rising prices and mortgage rates resulted in a significant number of potential buyers being unable to afford a new home. Sales dropped 5.1% year-over-year in Alabama but are still well above pre-pandemic levels and 24.2% above the 5-year average. The nationwide decline was more extreme with new home sales falling 26.9% from one year ago.
New home prices, however, continue to trend upwards. Rising costs for land, materials, and labor have driven sustained price growth along with more recent inflationary pressures. The median sales price for new homes increased 12.5% Y/Y in Alabama and 19.7% nationwide.
Alabama’s new home market is still undersupplied with 1.6 months of supply in April. The national market, on the other hand, is oversupplied with 9.0 months of supply. A balanced market will have between 4-6 months of supply.
Robert Deitz, chief economist for the National Association of Homebuilders, sees the slowdown in national new home sales as a sign of slowing economic activity. He said, “After an unsustainably strong period of new home sales from summer 2020 to early 2021, sales settled in to long-term trends in late 2021 and are now significantly weakening under tightening monetary policy. This is a clear recession warning for the overall economy for the quarters ahead.”
Sales: According to the Alabama Realtors, new home sales in April decreased 5.1% year-over-year (Y/Y) from 977 to 927 closed transactions. Following seasonal trends, sales decreased 11.7% from March. New homes represented 14.0% of all residential sales in Alabama during April, up from 13.8% one year ago.
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Inventory: New homes listed for sale increased 13.3% year-over-year from 1,321 listings one year ago to 1,497 in April. New builds represented 14.0% of all homes listed for sale in the state.
At the current sales pace, all the active new home inventory on the market would sell in 1.6 months, up from 1.1 months in March and up from 1.4 months in April 2021.
Pricing: The median sales price for new construction in April was $319,642, an increase of 12.5% from one year ago and an increase of 1.2% from March. The differing sample size (number of residential sales of comparative months) can contribute to statistical volatility, including pricing. ACRE recommends consulting with a local real estate professional to discuss pricing, as it will vary from neighborhood to neighborhood.
New homes sold in April averaged 34 days on the market (DOM), 7 days faster than one year ago.
National Overview: According to the U.S. Census Bureau, new home sales nationwide were at a seasonally adjusted annual rate of 591,000 in April. This represents a 16.6% decrease from the revised March rate of 709,000 and is 26.9% below the April 2021 estimate of 809,000
The median sales price for new homes increased 19.7% Y/Y from $376,600 to $450,600.
Supply of new homes was estimated at 444,000 listings (seasonally adjusted) in April, an increase of 8.3% from the prior month and an increase of 40.1% from one year ago. Months of supply also increased from 4.7 one year ago to 9.0 in April 2022.
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Monthly New Home Sales Data: Athens, Baldwin County, Birmingham, Calhoun County, Gadsden, Huntsville, Lee County, Marshall County, Mobile, Montgomery, Morgan County, Tuscaloosa, and the Wiregrass region.
The Alabama New Construction Monthly Report is developed in connection with the Alabama Association of Realtors.