New home sales continued to grow in December, rising 2.3% from November’s rate of 602,000 to 616,000, according to new data from the U.S. Census Bureau and the Department of Housing and Urban Development.
New home sales have been continuously rising since October, increasing by 7.5% from September to October before increasing 5.8% from October to November. However, numbers are still way below 2021. New home sales this time last year were at a rate of 839,000, meaning this year’s numbers decreased by 26.6%. Additionally, an estimated 644,000 new homes were sold in 2022, which is 16.4% below the 2021 figure of 771,000.
“Builder incentives and declining mortgage rates during the month of December helped push new home sales up for the month,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB). “However, because of higher construction costs and decreasing affordability, sales are down more than 25% compared to a year ago.”
Regionally, the Northeast was down 19.4%, the Midwest was up 35.2%, the South was up 6.5% and the West was up 15.3%. Compared to 2021, regional sales were down across the board: the Northeast was down 21.6%, the Midwest was down 14.1%, the South was down 17.5% and the West was down 49.6%.
As for home prices, the median sales price of new houses sold was $442,100, and the average sales price was $528,400. In addition, the seasonally‐adjusted estimate of new houses for sale at the end of December was 461,000, a supply of nine months at the current sales rate.
“In a further sign of decreasing housing affordability, even though the median home price is down for the second straight month, it is still up 7.8% compared to last year,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “Elevated inventories are another concerning sign of a soft market.”
As mortgage rates continue to decrease and economists have predicted a cooldown fast approaching in 2023-2024, there may be more openings in the market for buyers and sellers. However, there are still many market hurdles to overcome.
“Affordability is the name of the game for households as they seek to find it in housing—what is for many their largest single monthly budget expenditure. Today’s data shows that while some builders report offering incentives to buyers, still-high prices are unlikely to feel like a bargain. Meanwhile, sales prices for existing homes and rents also continue to climb. Even though the pace of rent and price growth is slowing, finding a deal remains an elusive quest for consumers,” said Realtor.com Chief Economist Danielle Hale. “Still, builders have a long-term deficit to make up for as our analysis suggests that the gap between household formation and housing construction continues to grow. This is one reason why some indicators point to an ongoing inventory crunch, even though builders have expressed concern about housing demand and the number of new homes for sale is up from a year ago.”
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