ACRE Commentary: New home sales retreated significantly in July, reflecting the abrupt shift of the housing market. Nationwide sales decreased 12.6% from June to a seasonally adjusted annual rate of 511,000, a decline of 29.6% from July 2021. Sales in Alabama, however, remained steady as the 846 new homes sold represent a slight increase (2.3%) from one year ago. New home sales in the state remained above pre-pandemic levels with July sales 6.0% above the 5-year average. However, declines of 5-10% are likely in the second half of the year as many potential buyers navigate affordability concerns from rising mortgage rates and sustained gains in home prices.
After falling in June, national new home prices rebounded in July, rising 5.9% from June and 8.2% from one year ago. Price growth has moderated significantly from the 24.2% Y/Y gain in August 2021.
New home prices in Alabama also continue to trend upwards with the statewide median sales price rising 1.1% from June and 15.0% from one year ago. 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 3.1 months of supply in July. The national market, on the other hand, is oversupplied with 11.2 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 July (846 closed transactions) decreased 15.7% from June and increased 2.3% one year ago. New homes represented 13.6% of all residential sales in Alabama during July, up from 10.9% one year ago.
Inventory: New home listings (2,634) increased 18.9% from June and 92.4% from one year ago. At the current sales pace, all the active inventory on the market would sell in 3.1 months, up from 2.2 months in June and up from 1.7 in July 2021. The equilibrium point where buyers and sellers have roughly equal bargaining power is 4-5 months of supply.
Pricing: The median sales price for new construction in July was $348,560, a record high and an increase of 15.0% from one year ago and an increase of 1.1% from June. 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 July averaged 26 days on the market (DOM), 4 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 511,000 in July. This represents a 12.6% decrease from the revised June rate of 585,000 and is 29.6% below the July 2021 estimate of 726,000
The median sales price for new homes ($439,400) increased 5.9% from June and increased 8.2% from July 2021.
Supply of new homes was estimated at 466,000 listings (seasonally adjusted) in July, an increase of 2.6% from the prior month and an increase of 28.0% from one year ago. Months of supply also increased from 5.9 one year ago to 11.2 in July 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.
