Data suggests more moderately-priced homes are selling
There was growth in the market for newly-built single-family homes last month.
Data from the HUD and Commerce Department show a 6.7% gain in sales to a seasonally adjusted annual rate of 689,000 homes. The monthly increase is from a downwardly revised April figure.
Michael Neal, senior economist with the National Association of Home Builders says the figures reveal a shift towards more modestly priced homes with the median price of new homes sold at $313,000.
While he says this is encouraging for first-time buyers, there are still challenges for the market despite a 5.2 month supply of new homes for sale.
“Since the end of the Great Recession, inventory has tracked the pace of sales growth. While we expect continued gains in single-family housing production, inventory may be partially constrained by ongoing price increases for lumber and other construction materials,” he says.
The South saw a 17.9% rise in new home sales to a post-recession high but there were declines for the West (8.7%) and Northeast (10%) while the Midwest was flat.
Builders may lose tax benefits due to higher costs
Tendayi Kapfidze, chief economist at LendingTree, says that the median price of newly-built homes sold last month is the lowest since April 2017, while the share of homes sold for $500K and above was the lowest since February 2015.
But he sees a potential issue for the sustainability for builders in producing more homes that will be attractive to more modest incomes.
“We had previously expected the tax cuts to improve builder margins by 10-15%, which we anticipated may have led builders to consider increasing activity at the lower-end of the market where inventory challenges are particularly acute. The tariffs may negate this benefit,” he says.
