March 25, 2024

New home sales fell 0.3% in February to 662 thousand after rising 1.7% in January,   New home sales reached a low point in the middle of last year, but have risen somewhat since then..

Existing home sales are being constrained by a lack of inventory and, as a result home buyers have been looking at new homes which are in more plentiful supply.  For this reason, existing home sales have only begun to climb from a record low level while new home sales have rebounded more sharply…

After having peaked at 7.6% mortgage rates have fallen to 6.8% which is providing some stimulus to new home sales.  As inflation continues to subside in 2024 mortgage rates should continue to decline to perhaps 6.25% by the end of this year.

Home prices fell 3.5% in February to $400,500 after having declined 1.2% in January. In fact, new home prices have declined in 5 of the past 6 months.  Over the past year new home prices have fallen 7.6%.

Housing affordability fell rapidly in 2021 and 2022 as mortgage rates and home prices climbed sharply.  It currently stands at  105.3 which means that median-income earning consumers had 5.3% more income than is required to purchase a median-priced home.  If mortgage rates decline in 2024 as inflation subsides, home prices decline somewhat further, and income continues to climb, affordability should rise sharply in 2024.  This should provide some stimulus for both new and existing home sales.

As a result, we look for new home sales to rise from 662 thousand currently to 725 thousand or so by the end  of 2024.

Stephen Slifer


Charleston, SC