Bright Spot: New home pending sales are up 48% year over year since February
MarketNsight, a leading real estate data and analysis provider, reports that pending sales in July were down 18% year to year – showing no significant change from the 19% decrease revealed in its January 2023 update. Unless interest rates drop significantly in the next few months, pending sales will end the year down 18 – 20%.
Down from the eight-month high of 6.96% at the beginning of July, 30-year Fixed rates averaged 6.81% at the tail end of July. Pending sales were down 7% year to year in the same period and down 21% against the benchmark year of 2019. For the year to date, pending sales are down 18% from 2022 and down 18% from 2019.
According to John Hunt, Principal and Chief Analyst at MarketNsight, despite the year-to-year numbers improving, pending sales are still down significantly from 2021. He comments, “Do not let the improving year-to-year pending sales numbers fool you. For example, Week Four of July 2023 was down 7% compared with the fourth week of July 2022, and that week was already down 20% from 2021.”
While total and resale pending sales are still in negative territory, pending sales for new construction continue to be positive – up 48% year over year since February. Resale pending sales have been down 20% year to year over the same period.
Year-to-year new home market share growth has moderated from the March high (+95%) but has yet to go below 50% all year. The new market share for the year to date is up an average of 67% over last year.
Hunt said, “This is the perfect environment for new homes to thrive. Demand is still 80% of what it was in 2022, and total inventory is now down year to year. Look for this trend to continue as long as rates are above 6% and resale inventory remains low.”
As per normal seasonal conditions, total inventory for the fourth week of July was up 10% from the end of June. For comparison, inventory grew 17% from June to July of 2022. Year to year, total inventory stayed in negative territory for July and sat at an 11% decrease from July 2022.
The housing market ended July with two months of supply, up from 1.8 in June. Inventory is still 51% below pre-pandemic levels. Hunt explains, “We need an additional 52,000 units annually in Atlanta just to get back to equilibrium, which is a MOS of 6. Our forecast remains that we will not see MOS go above 3 (half of normal) when it peaks in October/November and begins to drop again under normal seasonal conditions.”
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