Largest Ever 6-Month Decline in Price Explains the New Home Buying Surge

The median price of a new home plunged at the fastest rate six-month rate ever in April. The price rose a bit in May.

Median Sales Price Key Points

• The median price of a new home peaked at $496,800 in October of 2022.
• Homebuilders have been cutting prices like mad starting in November of 2022.
• The median price of a new home fell to $402,400 in April of 2023.
• The recent six-month decline was 19 percent, the largest six-month decline in history.

Median New Home Sales Price Percent Change From Year Ago

Percent Change Key Points

• The year-over-year decline in median price hit 12.18 percent last month, the fifth largest decline ever.
• In May, the year-over-year decline was 7.63 percent.
• In August of 2021, the year-over-year price hit 24.21 percent, the third largest in history.

New Home Sales Price vs Annualized Sales

The recent peak in new home sales hit 1.029 million in August of 2020, then fell by nearly half to 543,000 in July of 2022. These are seasonally-adjusted annualized rates. To put things into proper perspective, the actual number of new homes sales reported in May was 73,000.

Home builders finally got the consumer message that houses were not affordable due to the combination of high price, rising mortgage rates, and rising inflation overall.

The builders reacted by building cheaper homes and offering mortgage rate buydowns.

Existing Home Sales

In contrast to new home sales, existing home sales have mostly stabilized at a low level. On a long-term basis sales are very depressed.

Builders have the luxury of building smaller homes, taking out features, and offering interest rate buydowns. In contrast, existing home owners can do none of those things.

Many existing home owners want to move but do not want to trade a 3.0 percent or less mortgage for one near 7.0 percent. A quick check shows the Mortgage News Daily average price is currently 6.92 percent.

Related Posts

Case-Shiller home price data was released today. I will post analysis and charts shortly.