New-home sales surged 14% on a monthly basis in September to a seasonally adjusted, annual rate of 800,000, while the median sales price jumped 18.7% year over year to $408,800, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported.

On a year-over-year basis, new-residential sales were down 17.6%, indicating that last year’s overheated housing market has cooled to a more normal temperature, as homebuyers adjust to life in the pandemic. September home prices were up 1.8% from the previous month’s median sales price of $401,500.

The seasonally adjusted estimate of new houses for sale at the end of August was 379,000, representing a supply of 5.7 months at the current sales rate, according to a press release.

“There simply aren’t enough homes for sale relative to the demand fueled by millennials armed with low mortgage rate-driven house-buying power,” First American Deputy Chief Economist Odeta Kushi said, noting that September’s median sales price represents a new record high. “The inventory of existing homes for sale is near a 30-year low and a new home, at the right price, makes a decent substitute good.”

By region, the number of new homes sold in the Northeast surged 32.3% month over month to 41,000 on an adjusted basis, while they were up 17.5% in the South at 498,000, up 8.2% in the West at 197,000 and down 1.5% in the Midwest at 64,000.

“New home sales are up, and months’ supply is down,” Kushi added. “Build it (the hard part), and they will buy it because you can’t buy what’s not for sale in the existing-home market, but you may be able to buy a close substitute — a new home. Yet, affordability challenges persist, especially at the entry-level.”