New home sales are surging — here's why

• Sales volumes are roughly back to their pre-COVID levels — and are up 11.8% over last year.
• On the flip side, sales of existing homes are down 23% from last year.

Why it matters: It shows the new housing market has gotten a lift from frustrated buyers facing slim pickings of existing homes.

Context: The surge in mortgage rates over the last year has left a logjam in the existing home market.

• Demand is down as higher rates made buying houses less affordable to a lot of people.
• But higher rates have also pushed supply down — as homeowners who might have moved are reluctant to give up the low rate on their mortgages.

The result: Prices for existing homes — the vast majority of homes in the U.S. — have remained stubbornly high. Sales activity is way down.

Meanwhile, the market for newly built homes is a bit more flexible.

• Since no one is living in the newly built home, no one has to give up a super-low mortgage rate to move.

Between the lines: Homebuilders also appear more willing to cut prices in order to move their inventory of houses.

• So far this year, the median price of a new home is down 12%, compared to a 6% increase for existing homes.

• In the latest survey from the National Association of Home Builders, 30% of respondents said they had cut prices in April.

What they're saying: "The improving rate of new home sales is a reflection of the high levels of inventories of new homes compared to existing homes," wrote Richard de Chazal, macro analyst with brokerage firm William Blair.

• "Homebuilders are stuck with excess supply and are increasingly being forced to offer more aggressive incentives to clear the market," he wrote.

The bottom line: For homebuyers looking for a break, it seems to make a lot of sense to take a look at the market for newly built houses.