Sales of new single-family homes rose 0.4% in October from the month prior, at a seasonally adjusted annual rate of 745,000, according to a report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development released Wednesday.
Although this modest increase is a bit of a disappointment after sales increased by 14% in September, it brings the number of new home sales to its highest level since April 2021. However, this number is still 23.1% below the number of new home sales a year prior.
In October, the average sales price of a new single-family home was $477,800. Industry experts feel that higher prices might be pricing some prospective new home buyers out of the market, reflecting concerns expressed by homebuilders in October.
“Higher new-home prices may be pricing out some buyers on the margin,” First American chief economist Odeta Kushi said in a statement. “In October 2020, 36% of new-home sales were priced below $300,000. In October 2021, only 21% of new-home sales were priced below $300,000. Demand for new homes remains strong, but affordability challenges persist.”
At the end of October, the seasonally-adjusted estimate of new houses for sale was 389,000, representing a supply of 6.3 months at the current sales rate. In addition, the share of new home inventory that is not started increased for 21% to 28%.
This increase reflects the 0.7% month-over-month decline in housing starts reported in October. Experts attributed this dip to continued supply chain issues and labor shortages, however the continued high level demand and lack of existing home inventory means that buyers still have an appetite for new construction.
“The lack of existing homes for sale to meet this growing demand nationwide is supportive of new construction,” Kushi said in a statement. “Yet, as we know, builders are facing supply-side headwinds that make it more difficult and costly to build.”
Regionally, on a year-to-date basis, new home sales fell 11.8% in the Northeast and 1.1% in the West, but rose 11% in the Midwest and .2% in the South.