The median price of a new home plunged at the fastest rate six-month rate ever in April. The price rose a bit in May.
Median Sales Price Key Points
- The median price of a new home peaked at $496,800 in October of 2022.
- Homebuilders have been cutting prices like mad starting in November of 2022.
- The median price of a new home fell to $402,400 in April of 2023.
- The recent six-month decline was 19 percent, the largest six-month decline in history.
Median New Home Sales Price Percent Change From Year Ago
Percent Change Key Points
- The year-over-year decline in median price hit 12.18 percent last month, the fifth largest decline ever.
- In May, the year-over-year decline was 7.63 percent.
- In August of 2021, the year-over-year price hit 24.21 percent, the third largest in history.
New Home Sales Price vs Annualized Sales
The recent peak in new home sales hit 1.029 million in August of 2020, then fell by nearly half to 543,000 in July of 2022. These are seasonally-adjusted annualized rates. To put things into proper perspective, the actual number of new homes sales reported in May was 73,000.
Home builders finally got the consumer message that houses were not affordable due to the combination of high price, rising mortgage rates, and rising inflation overall.
The builders reacted by building cheaper homes and offering mortgage rate buydowns.
Existing Home Sales
In contrast to new home sales, existing home sales have mostly stabilized at a low level. On a long-term basis sales are very depressed.
Builders have the luxury of building smaller homes, taking out features, and offering interest rate buydowns. In contrast, existing home owners can do none of those things.
Many existing home owners want to move but do not want to trade a 3.0 percent or less mortgage for one near 7.0 percent. A quick check shows the Mortgage News Daily average price is currently 6.92 percent.
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Case-Shiller home price data was released today. I will post analysis and charts shortly.
In my neighborhood in Minnesota, 2 homes went up for sale and they both sold within a couple of weeks. Got what they were asking. Home prices are rebounding, but are not at all time highs (single digit drops).
A Lot of new homes being built too. The supply in this market is a bit tighter here.
Just my local experience
es, I live in Minneapolis proper and despite all the pearl clutching, houses in my neighborhood sell within couple weeks at asking price. OTOH a neighbor just became a realtor and it has been my experience when people quit their job to go into real estate it’s a good contrary indicator. Guees we’ll see.
Problem is it’s hard to build new homes in many areas. In California, for example, the populace talks about housing being a human right, but when someone tries to build low income housing in their neighborhood, they’re opposed to it.
I suspect what will happen over time is companies will figure out that it’s a lot cheaper to have remote workers, when possible, and their employees can live anywhere. They no longer need to pay a local living wage and don’t have to pay high office space rents. Plus, they can hire from anywhere. They’ll no longer have to deal with local talent shortages. At that time, real estate prices will be a lot more level across the country. People will be paying more for the house than the location.
House, house, house is not going to replace location, location, location.
No matter how devoutly it is wish’d.
I’ve been looking into the Finnish housing prices for years now and the huge, massive bubble is about to burst here also.
The Finnish housing is much to do with apartments which the “owner” owns particular set of stocks of the housing company and therefore has the right to living and control of said premises. With a utilities bill to match, of course.
New apartments have been selling with a downpayment something like a fifth of the total. Rest is a housing company loan that is paid monthly with utilities. Here’s when it gets interesting, normally first two years one pays only interest on the loan and many investors and “investors” have been using this in their advantage renting the apartments for the period of no capital paid back and then sold the apartment.
Now due to the Euribor interest rates going up (at the moment 1 year Euribor is 4.094 % + margin) from zero interest loans period, many are starting to feel the pain and are going underwater. Due to this, some apartments in my area are selling in auctions something like 5000 euros and buyer takes responsibility of the loan of 150K+ with the very low sales price. Still realistic rents are under what one needs to pay every month.
I’d say the bubble is just about to pop.
It’s a worldwide phenomena. Here in France mortgage rates are low nevertheless house prices are off 10% and still falling. The same thing is happening in the UK, Germany and Italy. Prices depend on global liquidity more than local liquidity it would seem.
American housing is larded-up with all kinds of “friction” and extra costs only a generalized collapse can undo. And China’s is too but for different reasons, yet when you see the practical Chinese have to start using a system like this, that will work, Oh Hell Yeah…watch out! America will not be far behind.
To wit: link to arizonadailyindependent.com
Boise Idaho my house was worth $500,000 in May 2022. Now worth $400,000 as of today.
Mostly due to increased interest rates.
I fully expect my Boise house to finalize at $340,000 before when this cycle ends.
How much was your house worth 5 years ago?
Not to worry, just another 25% decline to go…
or is the Obscene Cost of Housing here to stay?
This bodes well for inflation, might not be as hot as expected.
In my area, more people are going into real estate and real estate related businesses and winding down their day jobs/careers. A 3 night AirBNB rental of a fairly new 2500 sq foot house is around $2200 in a fairly remote local by a lake. The house sold for $600k in 2021. Something is very wrong with the economy favoring real estate over everything else but the tax loopholes keep getting bigger for real estate purchases/rentals. So maybe America should just become a place where everyone owns a lot of houses and just rents them out for a fraction of the year and takes all the tax deductions possible. I thought we tried an economy that was based mostly on real estate and homebuilding but evidently it will be different this time around.
Houses, bitcoins, tulips, all are the road to labor-free riches.
In the future we will all be selling insurance to each other and living off the premiums percentage.
Many high income earners are forced into real estate for the tax loopholes. I know I was forced into it myself because I had no other loopholes. I also suspect most wealthy people know we’re in for another inflation mess like the 1970s or at the very least, are hedging with real estate.
Real estate may correct/crash over the next few years but we’ll be back to zero rates at some point and the bubble will start all over again. If you have 15 to 20 year retirement window, real estate makes great sense.
Of course, you need to buy real estate in the right location where the area is growing population wise and economically because you don’t want to be stuck with the next Detroit.
I was forced into real estate by the rain and cold.
And immense heaps and heaps of stuff I accumulated.
It also helps that prices for Home builders inputs (such as lumber…etc.) have been dropping.
The slope to the top in the market and slope after the top in the market are equal in magnitude. The same can be said about the slopes at the housing bubble top ~15 years ago
This market makes zero sense. Interest rates are roughly 2.5x what they were in mid 2021… yet in major parts of the country (CA, SWFL, AND NY), we’ve seen housing prices stay relatively static. It seems like Austin, TX is one of the few major areas that saw a significant drop in price. It not only defies logic, but defies economic gravity.
Some of the lack of drop in price can be explained by movement from an expensive area to less expensive area.
For example if you relocate from NY/NJ to Florida to retire, you may be selling your 1.5 million dollar house and buying a 750K equivalent home in Florida. You can afford to pay that 750K inflated price because you got 1.5 for your prior home in a more expensive area.
Other possibilities include people simply swapping 1 paid off home for another paid off one of the same price in a different location (ie you had to move for work and sold a paid off 1 million home in city X and bought a 1 million home in city Y).
That’s why Mish is specifically looking at new home prices because those are typically first time buyers and those people are taking out mortgages.
You can see that sales volumes overall are dropping dramatically because people with mortgages aren’t moving. It’s only those with paid off that are moving.
Yes, but who is buying the 1.5k$ house?
For every person moving downscale, someone is moving into that 1.5k$ house in NY/NJ.
Probably people putting a lot down or paying with cash.