Sales of Newly Built Homes Drop as Prices Inch Higher

Despite an increase in supply, rising mortgage rates, and slowing sales in November, the median price of newly built homes rose nearly 19% year-over-year, reports CNBC. At the current sales pace, inventory for existing homes has reached a historically low 2-month supply, causing prices to jump yet again after months of steady gains.

Slowing home sales are also a result of inflated materials prices and supply chain disruptions hindering national builders who already faced a supply deficit before the pandemic. With high demand, builder sentiment is on the rise, but market experts predict even lower existing home sales in 2022 due to rising mortgage rates and more high prices to come.

Despite slowing sales and rising mortgage rates, the median price of newly built homes sold in November rose nearly 19% from November 2020. This came even as the supply of new homes rose. That rising inventory should push prices down, observers say. However, with inventory in existing homes historically low, prices in newly built homes are continuing to jump. The question for now is, how high is too high?

“A hefty correction appears to be due, but the rapid increases in existing home prices — inventory in that market is only one-third the level in the new home market, relative to sales — is putting extra upward pressure on new home prices,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics in a note to investors.

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