New homes sales jumped 14% in September and the number of new homes still for sale held steady. Here's what that means for homebuyers.
Homebuilders are gaining traction in an uphill push to replenish housing supply.
According to a HUD and U.S. Census Bureau report, new home sales jumped 14% from August to September to a seasonally adjusted annual rate of 800,000 single-family homes per year. Despite the uptick in sales, the number of new homes for sale held steady month-over-month at an annual rate of 379,000 units -- the highest level since 2008.
September was also the sixth consecutive month in which the supply of new homes for sale increased or stayed the same.
Increased supply is good news for homebuyers, as low inventory is a key driver of high prices and competition. Homebuilders have been hampered by land, labor, and material shortages throughout the pandemic, which has added to the cost and time needed to build new homes.
Inventory held steady during a month of greater-than-expected demand. This fact suggests that supply-side challenges are starting to ease, homebuilders are finding new ways around them, or both.
New homes sales were down 17.6% from last year. This is due in part to pandemic shutdowns pushing peak homebuying activity later into summer and fall in 2020. September 2020 was abnormally busy making year-over-year data less than reliable.
Compared to pre-pandemic years September 2021 was an exceptionally busy month for homebuying, but it also marks a return to normal seasonal patterns and a much-needed step toward supply and demand balance.
September 2020 September 2021 New homes sold* (000s)971800New homes for sale* (000s)286379Months’ supply3.55.7*Seasonally-adjusted annual rate of new single-family homes
Regionally, the Northeast led the push in new homes sales in September. This region saw a 32.3% increase in new home sales from August to September, and a 7.9% increase from the previous year.
The South (+17.9%) and West (+8.2%) also saw month-over-month gains while new home sales in the Midwest fell 1.5%.
Overall, the new home sales report shows increased activity during a month that is usually subject to a seasonal slowdown. This demand is likely driven by sub-3% interest rates for much of September, and is likely to ease as rates climb.
For homebuyers waiting for a more balanced market, supply and demand are headed in the right direction, albeit slowly. This is unlikely to lead to price drops in the near future, but is already slowing the rate of price increases.