New Home Supply Shows Sharpest Decline in 6 Years
Redfin, Seattle, said the supply of new homes fell by 1% in the second quarter, the biggest decline in six years.
The monthly report also said prices for newly built homes dropped by 0.5 percent year over year to a median of $372,900 in the second quarter. Redfin said prices for new homes have remained largely unchanged throughout the first half of this year after seven straight years of increases. Meanwhile, the median sale price for existing homes rose 3.2 percent in the second quarter to $309,700, continuing a seven-year trend of increasing prices.
The report said sales of new homes increased by 0.8 percent annually in the second quarter, reversing the trend seen in the previous two quarters, when new-home sales dropped. Existing home sales, which fell by 0.7 percent in the second quarter, have followed a similar pattern, though sales for existing homes have yet to reverse into positive territory.
Redfin Chief Economist Daryl Fairweather noted supply of new homes fell to the lowest level since first quarter 2013. Supply of existing homes was up 1.1 percent in the second quarter, the fourth consecutive quarter of increases.
“The moderation we’re seeing in new-home prices was expected and follows right along with our observation late last year that builders were finally shifting their focus toward offering smaller, more affordable homes,” Fairweather said. “While this change was a clear and long-needed response to homebuyer demand and tastes amid an affordability crisis and a softening market, it also means that builders are now focused on homes that are less profitable for them.”
As builders continue to adjust to a less favorable market, along with rising tariffs for building materials and a labor shortage, Fairweather said she expects to see new home inventory stay low overall. “But low mortgage rates and more affordable prices for new homes mean sales could strengthen a bit in the coming months,” she said.
Redfin said of the 10 metros with the highest sales volume, new home prices were down in five and up in five. In Houston, the metro with the most new home sales in the second quarter, the median sale price dropped 1.5 percent year over year to $297,978. Sale prices were also down in Austin (-3.6%; $308,429) and Tampa (-4%; $279,965). In Atlanta, the metro with the second-most new homes sold, prices were up 5.7 percent annually to $309,900. Prices were up 1.3 percent to $364,500 in Dallas and up 4 percent to $355,000 in Nashville.
The report said although the nationwide dip in new-home prices in the second quarter was small, there were bigger declines in expensive markets on both coasts. San Jose, one of the most costly metros in the country, recorded a 26.6 percent year-over-year decline in new-home sale prices, the biggest drop of any major U.S. metro tracked by Redfin, followed by West Palm Beach, Fla. (-16.7%), Honolulu (-13.6%) and Miami (-13.5%).
Redfin said places where prices for new homes rose were Greensboro, S.C. (26.8%), El Paso (12.8%) and Baton Rouge (10.4%).
The report can be accessed at: https://www.redfin.com/blog/new-construction-q2-2019.
