by Mish Shedlock, Mish Talk:
To entice buyers, home builders are building cheaper and cheaper houses. What are you getting for your money?
New Home Sales Key Points
- The average sales price peaked at $568,700 in December of 2022.
- The median sales price peaked at $498,800 in October of 2022.
- The average sales price in February of 2024 is $485,000. That’s a decline of 14.7 percent, $83,700 from the peak.
- The median sales price in February of 2024 is $400,500. That’s a decline of 19.4 percent, $96,300 from the peak.
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New Homes Sold vs Sales Price
Commerce data on new homes is very volatile and subject to huge revisions. Seasonal adjustments are a mess. To help smooth away some of the wild fluctuations, I calculated 3-month rolling averages.
On a rolling average basis, seasonally-adjusted, new home sales peaked at 1.015 million in October of 2020. On an monthly basis (not shown), sales peaked at 1.029 million in August of 2020.
Sales volume declined drastically from October 2020 to the bottom in November of 2022 at a three-month moving average of 575,000. That’s a decline of 43.3 percent.
At that point, home builders decided they would rather build more houses cheaper than fewer, more-expensive houses.
Three-Month Moving Average Changes
- The average sales price is down 8.2 percent, $44,734 from the moving-average peak.
- The median sales price is down 14.1 percent, $67,800 from the moving-average peak.
The price moving averages both peaked in December of 2022.
What Are You Getting?
Price is down but so are room sizes, the number of rooms, lot sizes, amenities, and landscaping.
You are not getting the same house for $400,500 as you did for $496,800. I question the claim that houses are now more affordable.
It’s like saying a bicycle is more affordable than a motorcycle, or cheese is more affordable than moon rocks.
New Home Sales Since 1963
Earlier today, I noted New Home Sales Little Changed in February
New home sales are about where they were in July of 1963 (blue highlights).
Sales are down 35.7 percent from the August 2020 seasonally-adjusted annualized peak of 1,029.
