New home sales soften in October as rates pass 7%

ACRE Commentary: New home sales nationwide rebounded somewhat in October even as 30-year fixed mortgage rates passed 7% for the first time since 2002. The seasonally adjusted annual rate increased 7.5% from September but sales were down 5.8% year-over-year. 

New home sales in Alabama decreased 24.9% from September and declined 19.3% from October 2021. New home sales have fallen below pre-pandemic levels as October sales were 7.5% below the 5-year average. Declines of 10-15% are likely by year end as the effects of rising mortgage rates and economic uncertainty continue to unfold. 

National new home prices trended back up in September and October after retreating somewhat in June and August 2022. The median sales price of $493,000 represented a gain of 8.2% from the prior month and 15.4% 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 were also on the rise in October, gaining 15.1% from one year ago but falling 4.6% from the prior month. 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 near equilibrium with 4.8 months of supply in October. The national market, on the other hand, is oversupplied with 9.7 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 October (680 closed transactions) decreased 24.9% from September and 19.3% from one year ago. New homes represented 14.0% of all residential sales in Alabama during October, up from 13.3% from one year ago. 

Inventory: New home listings (3,258) decreased 6.3% from September but increased 94.9% from one year ago. At the current sales pace, all the active inventory on the market would sell in 4.8 months, up from 3.8 in September and 2.0 in October 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 October was $338,688, a decrease of 4.6% from September but an increase of 15.1% from one year ago. 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 October averaged 38 days on the market (DOM), 12 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 632,000 in October. This represents a 7.5% increase from the revised September rate of 588,000 but is 5.8% below the October 2021 estimate of 671,000. 

The median sales price for new homes ($493,600) increased 8.2% from September and increased 15.4% from October 2021. 

Supply of new homes was estimated at 472,000 listings (seasonally adjusted) in October, an increase of 0.6% from the prior month and an increase of 22.0% from one year ago. Months of supply also increased from 7.6 one year ago to 9.7 in October 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. 

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