Newly-built home prices fall as builders try to meet demand for more affordable housing

In the second quarter of 2019, the nation’s home-sale prices for newly built homes fell 0.5% from 2018 levels. This means U.S. home-sale prices for new homes reached a median of $372,900 in Q2, remaining largely unchanged from the first half of this year, according to data from Redfin.

Although, home-sale prices for new homes remained stagnant, Redfin indicates that the median sale price for existing homes climbed 3.2% in Q2 to $309,700. This marks the seventh consecutive year of annual price increases.

Redfin chief economist Daryl Fairweather said the moderation of new-home prices is expected and confirms that builders are now shifting their focus toward offering smaller, more affordable homes.

“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,” Fairweather said. “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.”

According to the report, sales of new homes crawled forward 0.8% year over year, while existing home sales declined 0.7% in Q2. Notably, supply of new homes retreated 1%, marking the biggest annual decline since the first quarter of 2013.

Despite this drop, Redfin notes that supply of existing homes rose 1.1% in the second quarter, marking the fourth consecutive quarter of increase.

“The small price decline for new homes in the second quarter, along with a 0.7% year-over-year decrease in new listings and a 3.4% annual drop in building permits, signals that the new-home market remained soft in the second quarter,” Redfin writes. 

The image below highlights changes in annual home-sale prices:

Redfin/ Q2 home prices

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