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New home sales can’t defy gravity for much longer

New home sales have brushed off a collapse in overall housing demand, rising 23% in the first half of 2023. More competitive pricing will be providing some support to sales, but the primary factor is the chronic shortage of existing homes for sale, driving buyers to the new home market. That supply dynamic will continue to support new home demand for some time yet, but sales can’t defy gravity forever. As a result, we expect new sales will drop back to around 600,000 annualised by the end of the year.

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