ACRE Commentary: New home sales rebounded in August even as rising mortgage rates and home prices have sidelined some potential buyers. Nationwide sales increased 28.8% from July to a seasonally adjusted annual rate of 685,000, and were down slightly (-0.1%) from August 2021. Sales in Alabama, however, declined 14.9% from July and 17.2% from one year ago. New home sales in the state retreated below pre-pandemic levels with August sales 9.8% above the 5-year average. Declines of 10-15% are likely by year end as many potential buyers navigate affordability concerns from rising mortgage rates and sustained gains in home prices.
National new home prices slowed 6.3% from $466,300 July to $436,800 in August, but increased 8.0% from one year ago. Annual price growth has moderated significantly from the 15-20% gains during the pandemic housing boom.
New home prices in Alabama also retreated from July, falling 5.0% month-over-month, but increased 11.3% 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 nearing equilibrium with 3.8 months of supply in August. The national market, on the other hand, is oversupplied with 8.5 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 August (720 closed transactions) decreased 14.9% from July and decreased 17.2% from one year ago. New homes represented 11.3% of all residential sales in Alabama during August, down from 12.2% one year ago.
Inventory: New home listings (2,722) increased 3.3% from July and 76.0% from one year ago. At the current sales pace, all the active inventory on the market would sell in 3.8 months, up from 3.1 months in July and up from 1.8 in August 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 August was $331,209, an increase of 11.3% from one year ago but a decrease of 5.0% from July. 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 August averaged 34 days on the market (DOM), 9 days slower 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 685,000 in August. This represents a 28.8% increase from the revised July rate of 532,000 but is 0.1% below the August 2021 estimate of 686,000
The median sales price for new homes ($436,800) decreased 6.3% from July and increased 8.0% from August 2021.
Supply of new homes was estimated at 467,000 listings (seasonally adjusted) in August, an increase of 1.3% from the prior month and an increase of 22.9% from one year ago. Months of supply also increased from 6.9 one year ago to 8.5 in August 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.