June 2022 New Home Sales
What happened this month:
June new home sales data reflect the impact of another month of high mortgage rates and rising inflation. A total of 590,000 new homes were sold in June, down 8.1% from the downwardly revised number in May, led by declines in all regions except the Midwest. The Relatively affordable Midwest has seen a huge increase in new home sales as buyers seek affordability.
New home prices showed signs of easing in June, falling 9.5% month-over-month to $402,400, but still up 7.4% year-on-year on the other. Half of new homes were priced below $400,000 in June, down from 55% of new homes in this range just a year ago, but up from just 40% of homes below of this brand in May.
What does that mean:
The double whammy of rising borrowing costs and ever-increasing registration prices makes it harder for buyers to find a suitable home in their price range. As a result, many home buyers have decided to put their buying plans on hold altogether in recent months, allowing the housing stock to recover from last year’s declines. As the increase in the number of homes for sale offers a breath of fresh air to buyers remaining in the market, builders have responded to cooling demand by slow down the pace of new home construction. New homes have grown in popularity over the past couple of years as existing home inventory has become increasingly scarce. The recent drop in buyers was seen as a signal of a slowdown in new home construction for the time being as builders, buyers and sellers see how the market settles in the new financial environment.
Builders eager to move new homes in a down market offered buyers a bargain, continuing the downward trend in median new home prices in May. This increased accessibility indicates a potential shift in trade-in buyers and investors to buyers looking for new construction at relatively affordable prices. The trend of affordable new construction could continue, as lumber prices fell below $600 this week, potentially giving builders some flexibility to address buyer concerns in their pricing strategies.