Texas metro areas took four of the top five spots for new home sales volume over the past year
New home price trends continue to mirror existing home prices. After posting record-high 15% appreciation in June 2022, annual price gains for new homes slowed to 1% by October 2023. Existing homes also reached a high of 20% annual appreciation in June 2022 but slowed to 2% by May 2023, according to CoreLogic Home Price Index data.
Since their respective bottoms, both types of homes have seen prices steadily rise, with new homes appreciating by 4% in February 2024 and existing homes by 6% on an annual basis. Figure 1 shows year-over-year appreciation for both existing and new homes over the past decade. The two types followed a very similar path through the 2010s that continues into this decade, with the only notable difference being that existing homes experienced stronger appreciation during the pandemic price surge.
Figure 1 makes it appear that new home price gains are lagging existing home price gains, but this is largely an illusion. The chart above follows price trends at the date of deed transfer, not the date a sale agreement was reached. Most new homes sell before they are completed, meaning that there is a longer time gap between the date a price is agreed upon and the date the property is sold. How long this process takes depends on the stage of construction and the particulars of the closing process.
Interestingly, the gap between the new and existing home price peaks and troughs is different. New homes hit a peak two months after existing homes, but the gap was five months for the bottom. These numbers likely reflect a slowdown in construction speed.
New, Existing Home Sales Fell into Negative Territory in Late 2021
Figure 2 shows the annual change for both new and existing home sales volume since January 2019. Both began to turn negative at the end of 2021 and have remained negative since. Declines in 2022 were mostly due to the record number of transactions in 2021, and decreases in 2023 were because of dampened demand caused by high interest rates.
This downturn does seem to have reversed throughout 2023. The uptick in sales continued in the first few months of 2024, and it is likely that the market will see positive numbers by the end of 2024. This is not reflective of a strong market for new homes, however; rather, it shows just how weak the market was last year that positive sales growth would be recorded amid mortgage rates in the 7% range.
Sun Belt Metros Dominate Markets With Most New Home Sales
Texas markets led the U.S. for new home sales over the past year, taking four of the top five spots. Dallas and Houston recorded a respective 39,000 and 31,000 new homes sales from March 2023 through February 2024. Austin landed at No. 4 despite its recent price declines, while San Antonio took to No. 5 spot. All the other metros in the top 10 were in the Southeast except for Phoenix and Las Vegas. Overall, the top markets’ locations point to the most important determining factor of how new home sales drive population growth.
New home sales growth, however, has remained down in most locations over the past year. Seven of the top 10 metros in Figure 3 saw a decline, with Atlanta’s being the most substantial at -22%. Despite being the top market in the country for new home sales volume, Dallas also saw a substantial drop in sales, down by -14%. No other metros in the Top 10 posted declines of more than 10%.
Las Vegas, Tampa and Phoenix were the top three markets for new home sales gains. Phoenix’s growth was only 1%, while Tampa showed a stronger gain of more than 8%. Las Vegas posted a staggering 27% increase in new home sales.
Overall, both new and existing home sales should remain low in 2024. There is no real indication of widespread price drops or a substantial decline in interest rates, so demand should remain suppressed. However, there should still be something of a return to normalcy; 2022 and 2023 showed declines, mostly because sale numbers were so high in 2021, so some reversion to historical averages is likely. And though homebuying demand is suppressed due to affordability challenges, this is somewhat balanced by strong rental demand, so it very possible that investors will step in to fill the gap.
CoreLogic’s team of economists regularly weigh in on the latest housing market conditions, and their insights and analyses can always be found at this home page.
