New-home sales picked up sharply in November and December, according to the latest release from the U.S. Census Bureau, in a somewhat surprising—and welcome—indicator that housing demand remains persistent against macro uncertainty.
New-home sales were up 12.3% year-over-year in November and jumped 3.8% in December during what is normally a slower time for transactions. Single-family sales grew even faster in the near-term, with a 15.5% surge from October to November.
Bright MLS Chief Economist Lisa Sturtevant postulated that the unexpected jump might have something to do with what builders can offer buyers in the current unaffordable environment, as well as a dip in mortgage rates.
“While affordability challenges are still keeping some homebuyers out of the market, homebuilders have flexibility to offer rate buydowns and extra amenities and features to attract buyers,” she noted in a statement.
Sturtevant also pointed out that new-home inventory fell from last year, and predicted that builders would continue to increase their output into the spring. The Northeast and Midwest—where existing-home inventory is most “constrained”—saw the biggest increases, at 12.1% and 30.1% year-over-year in December, respectively.
Realtor.com® Senior Economist Joel Berner affirmed that the report is “an encouraging sign” for the market.
“(B)uyers are responding to lower mortgage rates and deciding to pull the trigger on newly built homes,” he said. “This uptick in demand during a period of slower supply growth has moved the new home segment from buyer’s market territory into balance.”
New-home sales in the Northeast actually fell sharply on a monthly basis from November to December, by 37.3%, coinciding with some significant weather events and freezing temperatures in that region.
Looking ahead at the macro picture, new homes remain more closely aligned in price with existing homes, continuing a years-long trend, but Sturtevant cautioned that high construction costs are cutting into builder profits.
“(I)t will be a much more restrained new home market than in 2021 and 2022 when the inventory of existing homes was at historically low levels and new home prices were rising at double-digit rates,” she said.
The median cost of a new home came in at just over $414,000, compared to $396,800 for an existing home, according to the latest data from the National Association of Realtors®.
Berner pointed out that sales in the more affordable price points rose the most.
“Entry-level inventory is hard to come by in the market for existing homes, and builders are effectively filling in that gap,” he said.
