The new home market remained soft in the second quarter of 2019, according to the latest from Redfin, which highlighted a number of factors that have played into its weak performance so far this year.
Last quarter, the supply of new homes fell by 1%, representing its biggest annual decline since Q1 of 2013. At the same time, new home sale prices fell just 0.5% from last year, remaining mostly unchanged after seven straight quarters of increases, Redfin revealed.
Meanwhile, the supply of existing homes increased 1.1% in Q2, climbing for the fourth straight quarter. And the median price of existing homes rose 3.2% in Q2, continuing its seven-year climb.
These stats, coupled with the fact that new listings have declined and building permits are down, signal a weak market for new homes.
“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,” said Redfin Chief Economist Daryl Fairweather. “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 also said he doesn’t expect new-home inventory to rise anytime soon.
“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,” he said. “But low mortgage rates and more affordable prices for new homes mean sales could strengthen a bit in the coming months.”