Economists' Outlook

Housing stats and analysis from NAR's research experts.

New Home Sales in May

  • Sales of newly constructed homes soared to the highest level in six years. In May, sales jumped 19 percent to an annualized pace of 504,000 units.
  • Rising sales are a reflection of pent-up demand and indicate further increases in new home construction. The current inventory level is tight, at only 4.5 months supply.
  • The median price of a newly constructed home is now at $282,000, up 6.9 percent from one year ago. The new home price still carries a large premium over a typical existing home price.
  • Whatever is being built is moving swiftly. On average it takes 3.3 months to lead to a sale. A few years ago, it took on average over a year to find a buyer.
  • The outlook is for homebuilders to keep moving dirt at an accelerated pace. New home sales will grow by 17 percent this year and another 40 percent in 2015. The dominant existing home sales market, which makes up over 90 percent of all home sales, will see a modest reduction in sales this year, and then rise 5 to 10 percent next year. Job creation and pent-up demand will overpower the impact of modestly higher mortgage rates that is anticipated next year.
  • New home sales operate on a first-come, last-in basis in some markets. That is, once a community is developed, the existing residents will fight tooth-and-nail to prevent further developments. One can witness that in places like Boulder, CO and San Francisco. The homeowners there, with limited supply, will enjoy higher home prices. Since not everyone in the community can be homeowners, the renters will feel left out. The wealth gap between the rich and the poor as a result tends to be widest in these hard-to-build new home cities.

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