New Home Sales Increased in March 2023
According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, 683,000 new homes sold throughout the month of March. This is 9.4% higher than the number of new homes sold in February but still 3.4% the number that sold during the same time period last year.
New homes sold for a median sales price of $449,800 in March, which is lower than the median sales prices for all homes. Homebuyers spend less money on new construction homes than they do on existing homes, despite that new construction homes can cost more to develop, plan, and execute.
New Home Sales 2020-2023
New construction sales varied greatly between 2020 and 2023. In the months leading up to the COVID-19 pandemic, homebuyers were not purchasing newly constructed homes in large numbers. Once the pandemic hit, that metric dropped even further as buyers stopped decreasing their real estate activity.
With record-low interest rates in the summer of 2020, buyers took advantage of an appealing market and decided to purchase homes. New home sales increased to their highest level over the past five years. Homebuyers who could not purchase property during the spring of 2020 had to wait until the summer, creating a larger pool of buyers during that period.
After the 2020 Peak
Since the summer of 2020, higher interest rates and lower inventory have decreased the sales of new construction homes. Heightened levels of activity created a frantic market where buyers had to compete in bidding wars, waive contingencies, and settle for homes outside their search criteria if they wished to purchase property at all.
Additionally, low inventory levels make it difficult for buyers to find new construction homes, often open for existing properties. Supply shortages of materials like lumber have also made it more difficult for contractors and developers to keep up with the rate of demand for new homes.
Low Starts, High Completions
While housing sales increased over the past month, housing starts decreased from February to March. In March, only 1,413,000 privately-owned housing units authorized housing starts, which is 8.8% below the same metric from February. However, 1,542,000 housing projects wrapped completion in March, which is only 0.6% of the completion rate for February. Overall, housing completions are up 12.9% compared to March 2022.
More completions create more opportunities for buyers looking to purchase property, which directly corresponds to higher rates of home sales. Lower housing starts, however, indicate that there may not be as many completed housing units hitting the market in future seasons.
Advice for Homebuyers
Homebuyers who are looking to purchase a newly constructed home should consider purchasing over the next few months. With decreased levels of housing starts, there may not be as many available properties on the market down the line. Therefore, those who are already considering purchasing property can search among higher levels of current inventory to find a home that best matches their needs.