New-Home Prices Fall to a Two-Year Low, Sending Sales Up 6%

Sales of newly built homes surged in November as prices fell to their lowest in more than two years, wooing cash-strapped buyers off the sidelines.

The median sales price of new houses sold last month was $402,600, down 6.3% from a year ago and the lowest level recorded since February 2022, the U.S. Census Bureau reported on Monday.

The number of signed contracts to buy new homes jumped 5.9% from October, to a seasonally adjusted annual rate of 664,000. The November sales figure was up 8.7% from a year earlier.

Of the newly built homes sold in November, 25% sold for less than $300,000, up from a 13% share in October and 17% a year earlier. The median new-home sold price in November was lower than the $406,100 median sales price for existing homes that month, flipping the typical trend that sees new homes sell at a premium.

New-home prices are much more volatile than those of previously owned homes and don’t usually follow the same seasonal patterns. Instead, they often reflect changes in the mix of new construction for sale, as builders pivot to larger or smaller floor plans to meet the demands of the market.

That could mean that November’s price data is something of a fluke. Or it could signal that builders are seriously ramping up their efforts to offer smaller, more affordable homes in a housing market squeezed by high prices and stubbornly high mortgage rates.

“It’s a common misconception that new builds are out of the price range of prospective buyers, when the reality is that new construction is often offering better prices, better financing, and a better product than the existing-home segment is now,” says Realtor.com® senior economist Joel Berner.

Supply of new homes continues to rise

The number of new homes for sale continued to rise in November, climbing 2.1% from the prior month to a seasonally adjusted annual level of 490,000. It marked a supply of 8.9 months at the current sales pace, in stark contrast to the 3.8-month supply of existing homes recorded in November.

New homes now make up 26.9% of all homes for sale, a signal of how important new construction remains in a market still suffering from the “lock-in effect” of high mortgage rates.

New-home inventory includes homes at all stages of construction that are available to purchase, including those yet to be built. But the share of new homes for sale that are completed and ready to move in reached 25.3% in November, the highest since 2016.

“A result of this healthy supply growth is that more move-in ready new homes are on the market for buyers to actually take a look at,” says Berner. “This is a positive development for buyers, who can take their time, see a finished home, and make an informed decision more than they have been able to for years.”

Midwest and South lead new-home sales growth

Home sales for new construction grew in the Midwest and South last month, while tapering in other regions as some unusual spikes in the October data settled back to normalcy.

Sales in the Midwest grew 17.3% from October, to 88,000 seasonally adjusted annualized units, a 10% increase from a year earlier.

Southern sales grew 13.9% on the month, to 417,000 annualized following an unusual dip in October. Sales in the South were up 13.6% from a year earlier.

After skyrocketing in October, Northeastern sales fell back into line to 23,000 annualized, dropping 41% on the month and remaining 11.5% below November 2023 levels.

Although the West is second only to the South in the number of new homes sold, sales volume declined there 7.5% from October, to 136,000 annualized, down 1.4% from a year ago.

“Some of the regional oddities from the October new-home sales data seem to have settled back into place,” says Berner. “The Midwest will almost certainly be the region that has the best 2024 in terms of new-home sales, with a 17.6% year-to-date edge over 2023 already.”