New Home Sales Increase, Affordability Still a Challenge
Sales of new single-family houses in the United States experienced a significant increase of 10.6 percent in July, according to the latest report by the U.S. Census Bureau and the Department of Housing and Urban Development. The annual rate of new homes sold in July reached 739,000, surpassing the estimated 700,000. However, despite this positive development, housing affordability remains a challenge for potential buyers.
The report reveals that the median price of new houses sold nationwide in July 2024 was $429,800, with an average price of $514,800. Higher interest rates continue to deter buyers, making it difficult for them to afford homes. Carl Harris, the chair of the National Association of Home Builders (NAHB), emphasizes the need for policies that promote the construction of more attainable and affordable housing to address the issue of high housing costs.
The NAHB predicts gradual improvements in the home-building sector as the Federal Reserve hints at potential interest rate cuts in September. On a regional basis, new home sales in the Midwest have seen a 22.1 percent increase year-to-date, followed by a 5.4 percent increase in the Northeast and a 6.1 percent increase in the West. However, the South has experienced a 2.4 percent decline in new home sales.
Incentives Offered by Homebuilders
To entice potential buyers, the NAHB reports that 64 percent of homebuilders are currently offering incentives, which is the highest level since April 2019. Michael Shabot, an associate broker with Keller Williams New York City, notes that developers of newer condos are offering incentives such as free monthly common charges for the first year or free storage lockers to maintain their prices and attract buyers. Shabot has seen a surge in new construction sales in Manhattan, with both luxury and mainstream residential real estate experiencing high levels of activity.
Manhattan’s Luxury Market Thriving
The luxury market in Manhattan, which includes residential properties priced above $4 million, has been performing exceptionally well. Property Shark, a provider of real estate data, reports that the median home-sale price in Manhattan in July 2024 was $1.2 million. Shabot mentions that his clients include empty nesters, individuals seeking second homes in the city, international buyers, and parents purchasing condos or co-ops for their children due to rising rental costs. The stock market’s positive performance has also contributed to the robust real estate market in Manhattan.
Arizona’s Real Estate Market Attracts Buyers
Sindy Ready, the 2024 president-elect of the Arizona Association of Realtors, has observed an increase in home sales, particularly in new construction. Ready, who works as an agent with RE/MAX Excalibur in the Phoenix/Scottsdale area, attributes the rise in sales to the influx of tech industries in the region. Maricopa County, also known as the “Valley of the Sun,” has seen consistent sales growth since the beginning of 2024. The area currently offers close to 21,000 homes for sale, attracting a mix of local, national, and international buyers.
Californians Seek Affordable Options in Arizona
Ready mentions that Californians are still relocating to Arizona in search of more affordable housing options. Many Californians are unable to afford homes in their home state and are opting to buy in Arizona instead. For example, a young couple renting in California recently purchased a home in Arizona and are now renting it out full time. This additional income may eventually enable them to buy in California or make Arizona their permanent home.
Sales of Existing Homes Show Improvement
In July, sales of existing homes in the United States increased by 1.3 percent, breaking a four-month streak of declines. The National Association of Realtors (NAR) reports that three out of four major U.S. regions experienced sales growth, with the Midwest remaining steady. Existing-home sales in the Northeast rose by 4.3 percent, while the West saw a 1.4 percent increase. The South also saw a 1.1 percent increase, while the Midwest saw no change.
Affordability Improves with Lower Interest Rates
NAR chief economist Lawrence Yun notes that although the gain in home sales is modest, consumers now have more choices, and affordability has improved due to lower interest rates. As of August 26, the average interest rate for a 30-year fixed mortgage is 6.51 percent, which is 5 percentage points lower than the previous week’s average. The median price of existing homes in July 2024 was $422,600, an increase of 4.2 percent from the previous year.
Conclusion
While the housing market continues to face challenges related to affordability, the increase in new home sales and the improvement in existing home sales indicate positive trends. The availability of incentives offered by homebuilders and the potential for interest rate cuts provide hope for prospective buyers. Manhattan’s luxury market and Arizona’s real estate market are thriving, attracting buyers from various backgrounds. The overall improvement in the housing market, coupled with lower interest rates, may contribute to further growth and increased affordability in the future.
