New home sales were down in many major metro areas throughout most of 2023, with the New York region posting the largest decline
New home prices followed a similar path to existing home prices in 2023. After increasing by 10% in 2022, annual new home price growth slowed to 2% through November 2023. Similarly, existing homes showed annual appreciation of nearly 20% in mid-2022 but never exceeded 6% in 2023, according to CoreLogic’s Home Price Index.
Figure 1 shows year-over-year appreciation for both existing and new single-family homes over the past decade. There have been few differences in price changes between the two property types, although existing homes experienced significantly more appreciation beginning in 2020.
Figure 1 makes clear that new home price trends tend to lag existing home appreciation by a few months. This is because new homes typically have a longer time gap between the sales date and the transfer of ownership, which can range from a few weeks to several months depending on the stage of construction and the time needed for the closing process. During this period, housing market conditions may change, affecting the supply and demand of both new and existing homes. Therefore, new home prices may not reflect the current market value of existing homes but instead the value at the time of sale. Since existing home sales prices have ticked up in the past few months, we should expect new home prices to follow this trend in early 2024.
Both New and Existing Home Sales Dropped in 2023
Figure 2 shows the annual change in both new and existing home sales volume since January 2019, illustrating that both new and existing home sales continued to decline in 2023 following a drop in 2022. The decrease in new home sales was consistent throughout 2023, ranging from 10% to 25%. Existing home sales drops were even steeper, ranging from 33% in January 2023 to 16% in August 2023. These declines are not surprising given the increases seen in interest rates throughout the year.
The South Leads U.S. for New Home Sales
As seen in Figure 3, the top 10 U.S. Metropolitan Statistical Areas (MSAs) for new home sales are primarily in the South. As has been the case for some time, Dallas and Houston are the top MSAs for new home sales, with 37,000 and 28,000 such transactions occurring from January through November 2023, respectively. Phoenix and Las Vegas remain in the top 10 for new home sales volume, despite prices falling nearly 10% from the peak.
New York was the only Northeastern housing market in the top 10, primarily because of that MSA’s large condo stock. Roughly 80% of New York’s 9,000 new home sales were condos. By comparison, Austin, Texas had 1,200 new condo sales, and no other metro had more than 1,000. New York produces so few new single-family homes that if only those types of properties were included in this analysis, it would fall to 33rd, with only 2,000 new single-family homes sales in 2022.
Figure 4 shows that new home sales are down in nine of the top 10 metros. The exception was San Antonio, which saw an 8% increase in new homes sales through September 2023. Declines in other metros ranged from -4% in Dallas to -30% and –33% in Atlanta and New York, respectively.
Overall home sales have shown a sharp decline since 2021, and as interest rates moved even higher in 2023, there seems to be little to suggest that 2024 will offer major improvement. Year-over-year numbers may stabilize, signaling a stall in the slowdown, but with home demand remaining depressed, builders do not have an incentive to return to construction levels recorded before 2021. One potentially positive sign for builders, however, is that investors remain active, and that trend may provide some demand to propel new home sales.
CoreLogic’s expert team of housing economists regularly weighs on market trends of note, all of which are archived at this home page. We also produce regular reports on real estate construction building materials and labor costs, so check back often for updates.
