New home sales posted a solid gain last month, fueled by strong demand, low existing inventory and buyers' anticipation of future higher mortgage rates. Sales of newly built, single-family homes in September rose 14% to an 800,000 seasonally adjusted annual rate from a downwardly revised reading in August, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
"Limited existing inventory and low interest rates are keeping demand strong, and more potential buyers may be coming off the fence as they expect interest rates to rise in the future," said Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and custom home builder from Florida.
"Solid demand and ongoing building material supply bottlenecks continue to put upward pressure on new home prices," said NAHB senior economist Jing Fu. "Median new home sale prices are up 18.7% on a year-over-year basis. At the same time, only 21% of current sales are below $300,000, compared to a 35% pace a year ago."
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the September reading of 800,000 units is the number of homes that would sell if this pace continued for the next 12 months.
Inventory remains steady at a 5.7-months' supply, with 379,000 new single-family homes for sale, compared to 286,000 in September 2020. The median sales price continued to rise to $408,800 from the $401,500 median sales price posted in August, and rose 18.7% on a year-over-year basis, due to higher development costs, including materials.
Regionally, on a year-to-date basis, new home sales rose 1.9% in the Northeast, 3.4% in the Midwest and 1.6% in the South, but fell 8.8% in the West.