Redfin reports that new home sales rose 8.8% year-over-year in Q4 2019, which is the biggest increase in more than two years and the third consecutive quarter of increases.
Now, onto the bad news: The report also found that the new-home supply slipped 11.1% annually—the biggest drop in inventory since 2012 and the third straight quarter of declines.
Additionally, the inventory of existing-home supply fell 14.2% annually. The supply of new-home sales fell from its high of nearly 19% in 2014 and the gains of existing home supply of 9%.
The sale prices of new homes across the nation fell 0.3% year-over-year to $369,000 during Q4 2019. Redfin says this is the smallest drop during the past three quarters of declines. Existing home prices rose 6% and sales increased by 5.8% during the quarter.
“The market has seen a mismatch between where new construction of homes are needed the most and where new homes are being built, and that’s because builders are focused on areas where they can cheaply acquire and develop land,” Redfin Chief Economist Daryl Fairweather said.
Expensive cities like San Francisco have seen a decline in building permits, while construction is booming in places like Raleigh, North Carolina, and El Paso, Texas, which are already quite affordable.
“The only way to solve this mismatch between where people need homes and where homes are being built is for people to move to where the homes are, and that’s already happening,” Fairweather said. “Looking ahead, permits have increased thanks to low-interest rates, so even though inventory is down, there’s hope for the future given that permits are up so significantly.”
Raleigh reported 31.9% of all homes sold in Q4 2019 were new builds, which is the highest share of any metro. Raleigh was followed by El Paso (29.8%) and Nashville, Tennessee (29.5%).
Just 1.2% of all homes sold during the quarter in Newark, New Jersey, were new construction—the lowest share than any other metro. The second-lowest rate was reported in Rochester, New York (1.5%).
Little Rock, Arkansas, saw the largest rise of building permits at 208.9%. Bridgeport, Connecticut, was a close second at 172.1%.
San Francisco was found to have the largest decline in building permits, falling 67.4%.