New-home supply takes biggest drop in six years
With bidding wars subsiding, new-home sales prices dropped, causing the largest year-to-year decline in new construction since 2013, according to Redfin.
Overall for-sale inventory dropped for the first time this year in June and the supply of new construction followed suit, falling 1% year-over-year in the second quarter. The sales price for new homes also dropped 0.5% to a median of $372,900 while the median sales price on existing houses jumped 3.2% to $309,700.
"The moderation we're seeing in new-home prices was expected and follows right along with our observation late last year that builders were finally shifting their focus toward offering smaller, more affordable homes," Daryl Fairweather, Redfin's chief economist, said in a press release.
"While this change was a clear and long-needed response to homebuyer demand and tastes amid an affordability crisis and a softening market, it also means that builders are now focused on homes that are less profitable for them. As builders continue to adjust to a less favorable market, along with rising tariffs for building materials and a labor shortage, I expect to see new-home inventory stay low overall. But low mortgage rates and more affordable prices for new homes mean sales could strengthen a bit in the coming months," Fairweather continued.
At the metro area level, Frederick, Md., had the largest annual increase in building permits with a 136.5% rise, followed by Bridgeport, Conn., at 130%, and Allentown, Pa., at 80%. Tacoma, Wash., with a 54.9% drop was largest on the list, next to a 46.9% decrease in Orlando, Fla., and a 46% decline in Los Angeles.
Greensboro, S.C., recorded the biggest increase in new-home prices at 26.8% year-over-year, followed by a 12.8% rise in El Paso, Texas, and 10.4% in Baton Rouge, La.
San Jose, one of the nation's most expensive housing markets, had the biggest drop in annual new-home sales prices, falling 26.6%. Decreases followed in West Palm Beach, Fla., at 16.7%, and in Honolulu at 13.6%.
"When there's a shift in the market, new construction is always one of the first categories to take a hit," San Jose Redfin agent Kristen Nowack said in the press release. "In the San Jose area, overall prices are falling and there are plenty of homes for sale right now, which means buyers may be less likely to pay a premium for new construction. And when one builder starts dropping prices in response to the market, competitors follow suit, which could lead to overall lower prices."