October 2021 New Home Sales
What happened this month:
Sales of new homes was little changed in October, up just 0.4% from the revised September figure, with monthly gains in the Midwest (+11.0%) and South (+0.2%) offsetting declines in the Northeast (-11.8%) and West (-1.1%) . New home sales fell 23.1% from the level of activity seen a year ago in October, but remained at a high pace of 745,000 as the continuous change in preferences pushes home buyers towards the suburbs where the new communities of origin are more numerous and the availability of existing homes for sale is still limited. However, rising new home prices, to a median of $407,700 in October (+17.5%), and mortgage rates mean higher monthly costs for buyers, who are likely struggling with tight budgets by inflation for other goods and services as well. This is particularly acute for entry-level buyers. Only 1 in 5 new homes sold had a price below $300,000.
What does that mean:
For homebuyers who felt frustrated with the extremely limited supply of existing homes this year, new construction may seem like an attractive alternative. The monthly supply of new homes is significantly higher than that of existing homes (6.3 vs. 2.4), which should mean more options for buyers looking. However, digging closer reveals a significant catch. Many new homes for sale are either under construction (63% in October) or not yet started (27% in October). In other words, they’re not quite ready to move in, a less than ideal choice for homebuyers looking to settle down. For buyers with strict deadlines and limited budgets, the existing home market may be a better choice, but those who can afford to wait may find relatively more options and slightly less competition among new homes. which have not yet started. Due to limited availability, completed homes accounted for just 1 in 4 homes sold in October, a share more common during the booming 2000s. Additionally, the typical finished new home had been for sale for only 2.4 months since completion, much less than average for this time of year.