New home sales jumped up 11.9% in December versus November to an annual rate of 811,000, according to the latest joint report from the U.S. Census Bureau and Department of Housing and Urban Development. The steep increase is attributed to continued stable demand and diminished existing-home inventory.
Key findings:
- December 2021 falls 14% short of December 2020, and 7.3% short annually.
- The median sale price in December was $377,770 and the average sale price was $457,300.
- The seasonally adjusted estimate of new homes for sale at the close of December was 403,000, which is a six-month supply of inventory, assuming current sales rates.
What the industry is saying:
“New home sales lagged behind year ago levels by a notable amount, finishing the year down from 2020, but easily exceeding 2019’s total (683k). Although new homes for sale appear to be more plentiful than existing homes, there are signs that the inventory crunch is holding back sales for new construction as well. Rising construction costs, including both materials and labor, and ongoing materials shortages continue to challenge builders, making it difficult to complete homes and giving them a notable backlog to work through. However, recent construction data showed some progress. While total completions declined in December, single-family completions edged up from the prior month.
“With rising construction costs, new homes are priced at a premium. So far, buyers have been willing to pay up for the larger, more flexible spaces, promise of lower maintenance and better energy efficiency that new homes offer, even if it sometimes means waiting. The median sales price of new homes rose in December and hit a new annual high in 2021.
Looking ahead, the new year holds both promise and potential pitfalls for the housing market and homebuyers. As builders make headway on backlogs, we expect more options for homebuyers. But the cost of getting in the door will rise for homebuyers. Already, mortgage rates are up 77 basis points from a year ago with two-thirds of that increase occurring in just the last month. The combination of higher prices and higher rates mean that today’s housing payments for the typical-priced home will cost nearly $2,900 extra over the course of a year. To be successful in this environment, buyers will need to be hyper-focused on their budget and wishlist to ensure that they find the right fit.” – Danielle Hale, Realtor.com, chief economist
“Despite continued supply chain issues, builders have been able to make headway on homes and market demand remains high. This growth is notable because November and December are historically slower months for sales due to the holidays, yet performed strongly this year. Residential market sentiment remains relatively strong, and there is much to remain optimistic about.” – Kelly Mangold, principal, RCLO, Real Estate Consulting
