New home sales, like existing home sales, continue to trend higher. Similarly, low inventory is pushing up prices.
In September, new home sales were 389,000 (annualized rate after seasonal adjustment), which is a gain of 5.7 percent from one month prior and up a solid 27 percent from one year ago. There is still plenty of room for growth, however.
The inventory levels remain very low with only 145,000 newly built homes ready for sale. Though a tad increased from the prior month, it still remains essentially at a 50-year low point.
A combination of higher demand and low supply naturally means higher home prices. The median price of newly built homes therefore rose to $242,000, which is an increase of 11.7 percent. Not all of the price gain is a genuine appreciation, but rather builders starting to build a larger homes and in more expensive land areas. Prices are also being driven up by rising lumber costs.
Today’s news is another confirmation of continuing better trends in the housing sector. Housing, or more formally defined as residential investment for GDP purposes, will add about 0.5 percentage points to GDP growth in the upcoming quarter. In other words, the U.S. economy is in no danger of a fresh recession thanks to the housing market recovery.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.