What's the Latest Buzz Surrounding New Home Being Built Locally and Nationwide?

Homeownership might seem a distant dream for many, but it's a critical part of our economy. So, let's dive into some current real estate buzz surrounding new homes being built across America.

Homebuilders, previously in a slump since early 2022, are now back on the scoreboard. For the first time since July 2022, builder sentiment was signaling optimism.

The upbeat mood isn't just based on good vibes; it's backed by solid numbers. According to the U.S. Census Bureau and the Department of Housing and Urban Development (HUD), new home sales have been steadily climbing for five straight months. In April alone, sales surged by 4.1% from March, clocking an annual rate of 683,000 units. When compared to last year, that's a solid 11.8% gain.

With a tight housing market, new homes are selling like hotcakes. The spring season has been pivotal. Nearly 14% of all home sales were new homes, a significant jump from the 10% we usually see.

Inventory-wise, while the national stock of single-family homes has shrunk more than 50% compared to May 2019, new home supply at the end of April 2023 stood 30% stronger compared to 2019. Builders learned hard lessons during the mid-2000s when they overbuilt.  Now, builders are much more cautious and are not inclined to take huge risks by overbuilding.

The good news is existing home sales will eventually come back around to a balanced market because the "locked-in" owners, enjoying their low mortgage rates, will eventually put their homes on the market, adding more options to the mix.  However, it is difficult to know when that will be.  The likelihood is that interest rates will need to fall before we see more homeowners willing to sell.

Now, here's an interesting plot twist: although more homes were sold in April, the median price dipped slightly to $420,800, down from $449,800 in March. Builders are using price drops and incentives such as interest rate buy-downs and appliance upgrades to draw buyers.

Breaking it down by region, the Midwest and the South saw a boost in sales, with the South rocking a 17.8% increase. Unfortunately, the West and the Northeast took a hit with sales dropping.

Locally in Maricopa County, Arizona, we are experiencing similar trends.

In June 2023, Maricopa had 7,665 transactions close, with the median sales price of $470,937. Sounds good, but it's a 19% dip from last June, and 7.7% down from May this year. Despite that, prices rose by 1.6% from last month but are still 3.3% lower than last year. The good news? Median sales prices have been on the upswing for five straight months and are now 7.1% higher than in January 2023.

Let's dissect the market: new home sales and re-sales.

New home sales totaled 1,657, with a median price of $519,101, up 3.7% from last year and 2.4% from last month. The sales were up 8.1% from last June but saw a 7.3% decline from May 2023, likely the result of summer seasonality, another interest rate bump, or some combination thereof.  The bottom line is that builders seem to be enjoying a decent ride locally and across the country.

On the other hand, the local re-sale market has seen better days. For the month of June 2023, there were 6,008 re-sales, with a median price of $450,250. Sales dipped 24% from last year and 7.1% from May 2023. Even though prices were 7% lower than last year, they did edge up by 0.5% from last month.

The gist? Re-sale prices are rebounding but are still lower than last year. Tight supply and limited demand are impacting transaction counts, which are pretty weak relative to what is considered normal. On the flip side, the new home market is trending in the right direction, with higher pricing and stronger closing counts. In fact, the share of new homes sold was 21.6%, quite a jump from 16.2% last year.

Comparing these trends, it's clear that national and local trends are mirroring each other for now, which is not always the case.  Arizona has a history of being the canary in the coal mine for national housing trends.  At this point, all we can do is hope the recent upward trends continue favorably.  Stay tuned!