October 29, 2024

New home sales climbed by 4.1% in September to 738 thousand after having fallen 2.3% in August   New home sales can be volatile from month to month, but it seems clear that they are in a gradual uptrend.

After having peaked at 7.6% mortgage rates have fallen to 6.5%.  As inflation subsides further in 2024 and the Fed continues to reduce rates, mortgage rates should decline to 6.1% by the end of this year and to 5.5% or so by the end of next year.

Home prices rose 3.7% in September to $426,300 after having fallen 3.8% in September.  They tend to be rather bouncy from from to month but over the past year new home prices have been unchanged..

Housing affordability fell rapidly in 2021 and 2022 as mortgage rates and home prices climbed sharply.  It currently stands at 98.6 which means that median-income earning consumers had 1.4% less income than is required to purchase a median-priced home.  If mortgage rates continue to decline in 2024 as inflation subsides, home prices rise slowly, and income continues to climb, affordability should rise as the year progresses, and that median income earning family should have at least enough income to purchase a median-priced home by yearend..  This should provide some stimulus for both new and existing home sales.

As a result, we look for new home sales to rise from 738 thousand currently to 755 thousand or so by the end  of 2024, an increase of 15.5% for the year.

Stephen Slifer

NumberNomics

Charleston, SC