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New Single-Family Home Sales, Inventories, and Prices Rise in November – Robert Hughes

Sales of new single-family homes posted a gain in November, increasing 12.4 percent to 744,000 at a seasonally-adjusted annual rate from a 662,000 pace in October. Despite the gain, sales are down 14.0 percent from the year-ago level (see top of first chart). New home sales surged in the second half of 2020 but then slowed sharply in the first half of 2021. Since June of this year, sales have been slowly trending higher again (see top of first chart).

Sales of new single-family homes were up in three of the four regions of the country in November. Sales in the South, the largest by volume, rose 2.7 percent while sales in the West gained 53.2 percent, and sales in the Northeast increased 15.6 percent while sales in the Midwest were off 25.4 percent for the month. From a year ago, sales were up 8.8 percent in the Northeast and up 14.2 percent in the West but down 44.8 percent in the Midwest and off 21.2 percent in the South.

Despite the jump in sales, the total inventory of new single-family homes for sale rose 2.6 percent to 402,000 in November, the highest level since August 2008 (see bottom of first chart), putting the months’ supply (inventory times 12 divided by the annual selling rate) at 6.5, down 8.5 percent from October but 62.5 percent above the year-ago level (see bottom of first chart). The months’ supply is at a relatively high level by historical comparison and is substantially higher than the months’ supply of existing single-family homes for sale (see bottom of first chart). The median time on the market for a new home remained very low in November, coming in at 2.7 months versus 2.5 in October.

The median sales price of a new single-family home was $416,900 (see second chart), up from $350,800 in November 2020 (not seasonally adjusted). The gain from a year ago is 18.8 percent. On a 12-month average basis, the median single-family home price is at a record high (see second chart).

Record-high prices and somewhat higher mortgage rates are headwinds forcing some buyers out of the market. However, the rise of more flexible working arrangements (i.e. remote work) may provide some continued support for less dense housing. Furthermore, despite tight labor conditions and materials shortages, new home construction continues at a healthy pace. It is likely that these conditions will continue to impact activity in the housing market, and on balance, lead to softer demand, looser supply conditions, and slower future price increases.

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