New-home sales showed improvement in January—but left room to grow—at 555,000, a 3.7 percent increase, according to the U.S. Census Bureau and the Department of Housing and Urban Development (HUD). The average new-home sales price was $360,900, while the median was $312,900. New-home listing inventory was 265,000—5.7 months supply.
“This disappointing report showcases the paltry gains we’ve seen recently in the new-home market in stark contrast to the strength in the existing-home market,” says realtor.com® Chief Economist Jonathan Smoke. “While the numbers do mark the best start for the year since 2008, this slow pace indicates a clear problem to growth, given how far we are into an economic recovery. Mortgage rates aren’t to blame, since they remain historically attractive and have been relatively stable since the end of 2016. A big part of the problem is the supply side challenges builders are facing, like regulatory burdens, labor shortages and a lack of capital and financing options. Those reasons are partly why new homes cost 37 percent more than existing homes, based on differences in median prices, and that difference is keeping the new home market from growing to take advantage of strong demand.
“Consumers who have the luxury of being able to wait for a new home to be built and pay a little more can avoid the cutthroat competition we’re seeing for existing homes—but lots of people don’t have that option,” Smoke says.
Source: U.S. Census Bureau
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