In the third quarter of the year, the nation’s home-sale prices fell by 1.5% from 2018 levels, coming in at a median of $370,300, according to a report from Redfin.
The quarter’s decline, which now marks the biggest retreat since 2012, also represents the third consecutive quarter of price weakening.
Redfin suggests the price decline is partly a reflection of home builders responding to buyer demand for affordability, which strengthened sales during the quarter.
According to the company, new-home sales rose by 5.6% in Q3, marking the second consecutive quarter of increases.
However, new-home supply, which decreased 7.9% year over year, experienced the biggest inventory drop since 2012 and the second straight quarter of declines.
Redfin attributes Q3’s sales increase to a drop in new-home inventory as the typical new home was on the market for 90 days before going under contract, just about flat from 89 days the year before.
Nevertheless, the company claims the surge in sales, along with a nearly 10% year-over-year increase in residential building permits—the biggest in two-and-a-half years—might signal the beginning of a moderate recovery for the new-home market.
Daryl Fairweather, Redfin’s chief economist, said as mortgage rates remain low, more and more buyers are returning to the market.
“Buyers are returning to the new-home market thanks to low mortgage rates and relatively low prices,” said Fairweather. “And builders, also taking advantage of low-interest rates to fund projects, are paying attention to preferences for affordability, which has led to more sales.”
During Q3, several housing markets experienced a surge of new listings, including Raleigh, North Carolina, which was home to the nation’s most new home sales, according to Redfin.
In this housing market, 27% of homes sold in Q3 were new, the highest of any metros tracked by Redfin.
Allen Wyde, a Raleigh Redfin agent, said he’s seeing a resurgence in the new-home market in his area, partly because builders have begun addressing buyer demand after several years of shortages.
“While buyers in Raleigh have always been interested in new homes, construction nearly ground to a halt after the Great Recession as builders were scared of being left with newly built homes, they wouldn’t be able to sell,” Wyde said. “In the last two years, builders have loosened the reins and started constructing homes without a buyer in mind. And they’re selling.”
Raleigh isn’t alone, as building permits for all types of U.S. residential construction were up 9.7% year over year in Q3, the biggest increase since the first quarter of 2017. For single-family homes, building permits were up 3%, marking the first increase after three quarters of declines, according to Redfin.
“Residential construction was a bright spot in the economy in the third quarter, a sign that builders are working to fill an inventory gap,” Fairweather said. “As we head into the new year, I expect more new-home listings to hit the market, which should help sustain the relatively high level of sales.”
