New home buyers are frustrated with high interest rates and market uncertainty.
Why it matters: The new home market has remained relatively robust despite fluctuations in the stock market and persistent concerns about a recession. NewHomeSource data shows that buyers are starting to dig in their heels, insisting on rich incentive deals or walking away and leaving the homes on the market, where they could ultimately be sold at a discount.
“New home sales have been choppy to start the year but remain above 2019 levels,” said Ali Wolf, chief economist for NewHomeSource. “Today’s sale volume levels are fueled by the fact that builders are motivated sellers. They continue to offer incentives to drive sales, but we're seeing price cuts play a larger role in some areas.”
New home sales were flat month-over-month and down 6.9% compared to last year.
Prices fell 0.8% for entry-level to $328,540 and 0.2% for move-up to $518,931 but rose 0.4% for high-end homes to $910,304.
The monthly survey also showed that 35% of builders lowered prices in April, 49% held prices flat, and 16% raised prices. In April, 56% of new home communities offered incentives on to-be-built homes and 75% on quick move-in supply.
Houses that are nearly complete, but remain unsold, are often referred to as quick move-in inventory and can usually be occupied within 90 days. It’s a bad sign if too many homes are unsold in a tricky market, because builders may need to offer substantial incentives to sell.
However, QMI isn’t hitting the levels we saw in 2022, at least not nationally.
Across the country, there was an average of 2.3 QMIs per community in April, up 22% from the 1.9 this time last year but down 9.0% from the 2022 peak of 2.5.
On a metro basis, 84% of Zonda's select markets experienced a year-over-year increase in QMI count.
The markets that grew the most year-over-year were Seattle (+113.7%), Charlotte (+72.6%), and Washington, DC (+65.6%).
Jacksonville, Sacramento and Phoenix have seen the most growth in QMIs compared to the same period in 2019, with increases of 320.6%, 294.7%, and 205.8%, respectively.
