Increase in New Home Sales in the U.S

Increase in New Home Sales in the U.S

New home sales in the U.S. experienced a notable increase in September, reaching levels not seen in over a year. This rise marks a significant recovery in the housing market, reflecting renewed buyer interest and confidence. Builders have enhanced their offerings with higher incentives to attract potential homebuyers amid economic uncertainty. Additionally, a decrease in mortgage rates has made home purchases more affordable for many buyers. Overall, these factors combined have contributed to the revitalization of new home sales in the country.

Factors Driving the Increase

Ruben Gargallo Abargues is an associate economist at Capital Economics. He noted that new home sales increased in September. This rise was likely driven by last month’s decrease in mortgage rates. However, Gargallo warned that rates have risen again recently. He suggested that new home sales will not experience significant growth moving forward.

Surge in Mortgage Rates

Regional Sales Increase

Sales in the southern U.S. increased last month significantly. This marked the fastest pace of sales since April 2021. Additionally, there was an uptick in transactions in the Northeast region. This reflects a positive trend observed in several regions across the country. Overall, these developments suggest a strengthening housing market as demand rises.

Stability of Sale Prices

The average sale price remained relatively stable compared to the previous year, standing at $426,300. However, this amount is nearly 30% higher than at the end of 2019, reflecting the impact of inflation on the housing market.


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Builder Strategies

With housing affordability metrics at historically low levels, builders have been offering incentives, such as discounts or financing on mortgage rates, to facilitate sales. PulteGroup Inc., an Atlanta-based builder, indicated during its quarterly earnings call that the demand for additional incentives will persist for the remainder of the year.

Inventory Reduction

Builders are working to reduce inventories that are approaching record levels. This situation follows an increase in construction during the pandemic recovery. The supply of new homes rose by 0.4% in September. This increase marked the highest level of new home supply since 2008. Builders are adjusting their strategies to manage inventory effectively in this market.

Expectations for the Spring Selling Season

The industry is already anticipating the important spring selling season. Builder sentiment is crucial for gauging market confidence and activity. A builder sentiment index reached its highest level in four months in October. This increase was partly driven by expectations of lower mortgage rates. These expectations are likely to influence buyer activity in the upcoming season.

Additional Information

New home sales are a more immediate indicator than purchases of previously owned homes. This is due to timing differences in recording. Previously owned home sales are recorded once contracts are finalized. However, the data on new home sales can be quite volatile. The government report indicated a 90% confidence level for new home sales in the U.S changes between -10.6% and +18.8%.

Unemployment claims have returned to levels observed before the impact of two hurricanes in the Southeast. This indicates a recovery trend. Business activity expanded at a solid pace for most of October. The growth was driven by resilience in demand within the services sector.


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