Latest News about New Home Construction Sales in This Market
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October 31, 2022
By Nicole Friedman, WSJ
A comprehensive article about the current state of the new home construction market was published by the Wall Street Journal that covered these highlights:
- Mortgage rates have surged to 7%, their highness level since 2002 and more than double the rate of a year ago.
- Existing-home prices are declining from their springtime peaks, and single-family home construction in September fell 18% from a year earlier.
- Most builders learned their lesson from the 2007-2009 housing crash and have limited their exposure. They haven't bought as much land and haven't built as many spec homes.
- Unsold completed single-family homes are being offered to bulk investors for the rental market.
- Consumer sentiment toward the housing market fell in September to the lowest level since 2011, according to Fannie Mae.
- About 800,000 single-family homes were under construction in September, on a seasonally adjusted basis, up 11% from a year earlier and 52% from September 2019, according to the Census Bureau. Many of those homes were started before the market slowed.
- In an effort to lure reluctant buyers or keep others from canceling, builders are paying upfront fees to mortgage lenders to reduce buyers' mortgage rates and offering other incentives, such as long-term rate locks.
- At the end of August there was an 8.1-month supply of new homes on the market.
- New-home construction, which accounts for about 10% of overall home sales, faces a bigger risk of slowing sales and price declines in the near term because new homes typically are more expensive than existing homes
- Lennar Corp., the nation's second-biggest builder by volume, said in a September earnings call that new sales orders fell 12% in the third quarter from a year earlier. Its average sales price for new orders rose 1% from a year earlier, but fell 9% from the second quarter.
- Rising rates have hit the existing-home market, too. Between January and September, sales activity declined 27% on a seasonally adjusted annualized basis.
- A measure of U.S. home-builder confidence fell for the 10th straight month in October to the lowest level since May 2020, according to the NAHB. About one-quarter of builders surveyed by the association in September said they had reduced prices in the prior month.
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