New Home Sales Plummet

Last week the New Home Sales Report was released which measures signed contracts on new homes. Think of it like a pending sale on an existing home. Signed contracts dropped by 17% from March and sales are down a whopping 27% year over year. The new home sales pace is down to only 591k sales on an annualized basis. Because of this slowdown in sales months of inventory rose to 9; however, there are only 38k new completed homes for sale across the country and this 38k number puts months of inventory at just 0.8 months.

Why did this happen? It appears to be for 3 reasons—soaring prices, soaring mortgage rates and super lengthy construction periods causing uncertainty for home buyers. It’s very difficult and potentially dangerous to commit to buying a new home that won’t be completed for probably 12 months when there are fears of recession and soaring mortgage rates.

Unfortunately this may cause home builders to slow down the construction of homes as demand drops which is the LAST THING our market needs as we desperately need more new housing. This happened at the end of 2018 and in 2019 after rates nearly hit 5% in November 2018.