Photo: James Bombales
Facing historically low inventory levels and frenzied bidding wars in the resale market, buyers are snapping up new single-family homes at breakneck speed.
Last month, sales of new homes totaled 999,000 annualized units — down 0.3 percent from September, but 41.5 percent higher than the October 2019 estimate of 706,000. That’s according to new residential sales statistics released earlier today from the US Census Bureau and the Department of Housing and Urban Development.
An estimated 278,000 newly-completed homes hit the market in October on a seasonally-adjusted basis, far fewer than the total number of sales. Doug Duncan, Chief Economist at Fannie Mae, explains that this is due to robust pre-sales, or contracts signed before the start of construction.
“The share of homes sold but not yet started rose for the third straight month and now represents the highest share of total sales since 2005, while the number of fully-completed homes sold hit the lowest level since the COVID-19-related shutdowns this past April,” said Duncan.
Home sales have plateaued over the last three months, however, the rate at which they’re coasting (around 1 million annualized units) has “not been seen since 2006,” noted Duncan.
This brisk pace is unlikely to be sustained due to the lack of under-construction homes available. Projects that have yet to break ground may be less appealing to homeowners seeking to offload their current property in 2020’s highly-competitive market.
“We continue to project a convergence in coming months via a softening of sales while housing starts show comparative strength,” said Duncan.
New single-family home inventory dwindled further, amounting to 3.3 months of supply at the current sales rate, down from 3.6 months of supply in September. This caused the median sales price to increase 4.3 percent year-over-year to $330,600 — a $3,800 price hike over the previous month.
While rising new home prices might give some buyers sticker shock, record-low mortgage interest rates could help to keep monthly payments affordable.