Surges in both sales and building permits signal the beginning of a moderate recovery for the new-home market.
New-home sale prices dropped 1.5 percent year over year to a median of $370,300 in the third quarter. That marks the biggest decline since at least 2012 and the third consecutive quarter of declines.
Meanwhile, new-home sales rose 5.6 percent, marking the second consecutive quarter of increases.
New-home supply decreased 7.9 percent year over year, the biggest inventory drop since at least 2012 and the second straight quarter of declines.
Meanwhile, existing-home prices rose 4.2 percent, sales increased 2.1 percent and inventory fell 6.9 percent year over year.
The price decline for new homes is partly a reflection of builders responding to buyer demand for affordability, which strengthened sales, as we predicted it would.
The increase in sales also likely led to the drop in new-home inventory: Days on market were flat from the year before and there was just a small increase in new listings.
The surge in sales, along with a nearly 10 percent year-over-year increase in residential building permits—the biggest in two-and-a-half years—signals the beginning of a moderate recovery for the new-home market.
“Buyers are returning to the new-home market thanks to low mortgage rates and relatively low prices,” said Redfin chief economist Daryl Fairweather. “And builders, also taking advantage of low interest rates to fund projects, are paying attention to preferences for affordability, which has led to more sales. Residential construction was a bright spot in the economy in the third quarter, a sign that builders are working to fill an inventory gap. As we head into the new year, I expect more new-home listings to hit the market, which should help sustain the relatively high level of sales.”
Raleigh Redfin agent Allen Wyde said he’s seeing a resurgence in the new-home market in his area, partly because builders have begun addressing buyer demand after several years of shortages. Twenty-seven percent of homes sold in Raleigh in the third quarter were new, the highest of the metros tracked by Redfin.
“While buyers in Raleigh have always been interested in new homes, construction nearly ground to a halt after the Great Recession as builders were scared of being left with newly built homes they wouldn’t be able to sell,” Wyde said. “In the last two years, builders have loosened the reins and started constructing homes without a buyer in mind. And they’re selling.”
National new construction trends in the third quarter:
New-home sales increased annually in 50 of the 87 metros tracked by Redfin.
For new homes, the median price per square foot was $175, up 1.7% from the year before. For existing homes, it was $179, up 2.3% annually. (Price per square foot doesn’t necessarily provide a direct comparison for new and existing homes, as new homes are often located in less expensive neighborhoods away from city centers.)
The typical new home was on the market for 90 days before going under contract, just about flat from 89 days the year before. The typical existing home spent 38 days on the market, up from 35 days in September 2018.
New listings of newly built homes were up 1.5 percent, while new listings of existing homes were down 3.7 percent.
For all types of residential construction, building permits were up 9.7% year over year, the biggest increase since the first quarter of 2017. For single-family homes, building permits were up 3%, the first increase after three quarters of declines.
Building permits per 10,000 people rose 8.9%.
Metro-level highlights for new construction in the third quarter:
In Raleigh, 27% of all homes sold in the third quarter were newly built, the highest share of any metro. It was followed by New Orleans (23.6%) and Austin (21.8%).
Just 1.8% of all homes sold in the third quarter in Fort Lauderdale, FL were new construction, a lower share than any other metro. It’s followed by New Haven, CT (2.1%) and Pittsburgh (2.4%).
The rate of building permits increased most in Bridgeport, CT (84.7%), followed by San Diego (67.9%) and Salt Lake City (67.5%).
New Haven, CT experienced the biggest annual decline in building permits (-53.7%), followed by Memphis (-44%) and Baltimore (-41.8%).
Nassau County, NY had a 17.3% year-over-year increase in price per square foot for new homes, more than any other metro in the U.S. Next came Detroit (15.3%) and Salt Lake City (14.8%).
Fresno, CA saw the biggest inventory rise in the third quarter, with a 43.2% increase. It’s followed by Memphis (32.6%) and Oakland (29.1%).
Salt Lake City experienced a 72.2% decline in inventory, more than any other metro. Next came Greensboro, NC (-40.5%) and Allentown, PA (-34.1%).
Sales of newly built homes increased 52.7% to 113 in Fresno, CA, more than any other metro. It’s followed by Las Vegas (up 47.9% to 519 homes sold) and San Jose (up 44.6% to 120).
Sales of newly built homes decreased most in Jacksonville, FL, down 35% to 723 homes sold, followed by Memphis (down 30.7% to 115) and Salt Lake City (down 30.6% to 475).
See below for a downloadable set of monthly data on new construction prices, sales, inventory and other new residential market statistics. The dataset goes back to 2012.