New Home Sales, which measure signed contracts on new homes, rose 12.3% from August to September to a 759,000-unit annualized pace. This was much stronger than estimates and the highest level in a year, with sales up nearly 34% since last September. 

What’s the bottom line? The lack of existing homes for sale has caused many buyers to explore new construction options. Yet, more “available” supply is needed to meet demand, as only 75,000 of the 435,000 new homes available for sale at the end of September were completed. The rest were either under construction or not even started yet.

The tight supply of both existing and new homes will continue to be supportive of home prices. On that note, the median sales price for new homes was $418,800, which was down from $477,700 a year ago. While this may sound like home prices are declining, this figure is not the same as appreciation but represents the mid-price and can be skewed by the mix of sales among lower-priced and higher-priced homes.

Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis for the National Association of Home Builders, explained, “To compensate for this high interest rate environment, more builders are building smaller homes, which has resulted in a decline in the median new home price.”