ACRE Commentary: New home sales beat expectations in May as some buyers were quick to enter the market to stay ahead of rising mortgage rates. Nationwide sales increased 10.7% from April to a seasonally adjusted annual rate of 696,000 in May, but declined 5.9% from one year ago. Sales in Alabama, however, increased 11.6% year-over-year, the second consecutive Y/Y gain. New home sales in the state remained above pre-pandemic levels and 20.7% above the 5-year average during May, but declines are likely in the second half of the year as further interest rate hikes are anticipated.
New home prices 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 16.9% Y/Y in Alabama and 15.0% nationwide. Going forward, price growth is expected to moderate to 8-10% by year end as sales activity slows and inventory gradually rises.
Alabama’s new home market is somewhat undersupplied with 2.0 months of supply in May. The national market, on the other hand, is oversupplied with 7.7 months of supply. A balanced market will have between 4-5 months of new home supply.
Sales: According to the Alabama Realtors, new home sales in May increased 11.6% year-over-year (Y/Y) from 861 to 961 closed transactions. Following seasonal trends, sales increased 3.7% from April. New homes represented 13.6% of all residential sales in Alabama during May, up from 12.4% one year ago.
Inventory: New homes listed for sale increased 62.7% year-over-year from 1,177 listings one year ago to 1,915 in May. New builds represented 17.0% 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 2.0 months, up from 1.6 months in April and up from 1.4 months in May 2021.
Pricing: The median sales price for new construction in May was $328,769, an increase of 16.9% from one year ago and an increase of 2.9% from April. 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 May averaged 32 days on the market (DOM), 15 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 696,000 in May. This represents a 10.7% increase from the revised April rate of 629,000 and is 5.9% below the May 2021 estimate of 740,000
The median sales price for new homes increased 15.0% Y/Y from $390,400 to $449,000.
Supply of new homes was estimated at 444,000 listings (seasonally adjusted) in May, an increase of 3.3% from the prior month and an increase of 35.8% from one year ago. Months of supply also increased from 5.4 one year ago to 7.7 in May 2022.
Click here to view the entire monthly report.
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.
Additional Resources: Database of building permits and housing starts for all Alabama Counties and metro areas.
