New homes sales just jumped by 20% on a month-over-month basis – and hit the highest level since 2021 on an absolute level. What does this mean? It confirms the view that there is a lot of pent-up demand in the housing market, writes Eoin Treacy, editor of Fuller Treacy Money.
In Texas, for example, the average existing home is selling for around 4%-6% below list price. This is forcing homebuilders to compete by reducing prices and offering incentives. The biggest incentives are price cuts, mortgage rate buydowns, and concessions for things like floors, paint, or fixtures. Many home builders are offering very attractive mortgage rates because they have the scale to buy down the rate.
New Home Sales
The biggest objection homebuyers have is the rate is too high, the payment is too high, and they don’t have the available cash-to-close. Buying down the rate fixes the first problem, reducing the price or seller concessions fixes the second, and downpayment assistance programs fix the third.
The surge in new home sales suggests that the catalyst for action is lower rates. Buyers have been waiting for some relief in both rates and prices. They are now pouncing on deals.
Overall, home prices have moderated over the last couple of years following the feverish pace of appreciation during and immediately following the pandemic. Meanwhile, the purchasing power of the dollar has continued to decline and wages have trended higher.
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Housing- What the Surge in New Home Sales is Telling Us
New homes sales just jumped by 20% on a month-over-month basis – and hit the highest level since 2021 on an absolute level. What does this mean? It confirms the view that there is a lot of pent-up demand in the housing market, writes Eoin Treacy, editor of Fuller Treacy Money.
In Texas, for example, the average existing home is selling for around 4%-6% below list price. This is forcing homebuilders to compete by reducing prices and offering incentives. The biggest incentives are price cuts, mortgage rate buydowns, and concessions for things like floors, paint, or fixtures. Many home builders are offering very attractive mortgage rates because they have the scale to buy down the rate.
New Home Sales
The biggest objection homebuyers have is the rate is too high, the payment is too high, and they don’t have the available cash-to-close. Buying down the rate fixes the first problem, reducing the price or seller concessions fixes the second, and downpayment assistance programs fix the third.
The surge in new home sales suggests that the catalyst for action is lower rates. Buyers have been waiting for some relief in both rates and prices. They are now pouncing on deals.
Overall, home prices have moderated over the last couple of years following the feverish pace of appreciation during and immediately following the pandemic. Meanwhile, the purchasing power of the dollar has continued to decline and wages have trended higher.
Subscribe to Fuller Treacy Money here…
Read full article here »