Giving context to the downturn in new home sales in our market.
As we enter the second quarter of 2023, it’s time to take a look at how the real estate market is faring in northern Nevada. Today, we are focusing on comparing new home sales and resales. Let’s dive right into the numbers!
According to recent data, new contracts for new homes were down 53% in January 2023, followed by a 37% decrease in February. In total, year-to-date new home sales were down 45.37%. In comparison, resale contracts were down 24% in January, 14% in February, and were down a total of 19% year over year. While these numbers may seem alarming at first glance, it’s important to note that these figures only reflect new contract activity and do not take into account price, supply and demand, or months of inventory.
There are a few things that this data tells us. First, builders are not speccing homes as far ahead as they were in the past, which means there is less inventory for them to sell. This does not necessarily mean that people are no longer interested in buying new homes or that new homes are no longer in demand. Rather, a year ago, when interest rates were still at 3% at the beginning of 2022, builders had a lot more inventory under construction or that they were leasing. They were also more aggressive in their marketing, which naturally led to more new contracts being written.
Second, despite the slowdown in new home construction, costs have remained high due to inflation. Additionally, there has been a lot of apartment and other construction activity in northern Nevada, which has also contributed to the lack of a significant decrease in construction costs. Therefore, builders have not been able to get as competitive in their pricing as they would like.
Lastly, the decrease in transactions in both new home sales and resale may provide some upward support on both the value of homes and rental demand. While it is unlikely that all of the newly delivered apartments will be absorbed right away without any vacancy, the decrease in transactions means that it provides support in other areas of the market.
As we move further into 2023, we’ll continue to monitor the trends and see how the real estate market in northern Nevada evolves. If you have any questions, don’t hesitate to reach out to us by phone or email. We look forward to hearing from you.