Sales of new single-family homes surprised in December, exceeding consensus expectations of 649,000. New home sales reached a seasonally adjusted annual rate of 664,000, according to data published on Thursday by the U.S. Census Bureau and the Department of Housing and Urban Development (HUD). This strong finish to 2023 is 8% above the revised November rate of 615,000 and 4.4% above the December 2022 estimate of 636,000.
Demand picked up in December on the strength of declining mortgage rates. Builder confidence also improved with a reading of 44 in January.
At the current building pace, there is an 8.2 months’ supply of new single-family homes, exceeding last year’s pace. The current inventory remained elevated in December at a level of 453.000, up 0.4% compared to December 2022.
“New home sales ended the year on a high note thanks largely to falling interest rates and a decline in existing home sales,” Danushka Nanayakkara-Skillington, National Association of Home Builders’ assistant vice president for forecasting and analysis, said in a statement. “And while moderating interest rates are a promising sign for new home sales in the year ahead, long-term issues such as a shortage of buildable lots, a lack of skilled labor and excessive regulations will continue to pose challenges for builders.”
The median price for a new home trended down in December
The median sale price for a new home decreased 3% compared to November, falling to $413,200. It fell nearly 14% compared with one year ago. However, prices for new homes remain significantly higher compared with pre-pandemic new-home prices.
According to First American Deputy Chief Economist Odeta Kushi, the decline in prices can be partially attributed to two factors: the builders’ strategy to offer price incentives to entice buyers, and a shift in the ‘mix’ of new homes being sold. The median sale price of a new home in December 2023 was $413,000, and 47% of homes sold were priced below $400,000. In comparison, the median price for a new home in October 2022 was approximately $497,000, and only 33% of new homes sold were priced below $400,000.
Overall, homebuilders charged less for houses in 2023 than in 2022 and sold more houses. According to Holden Lewis, home expert at NerdWallet, the median price of a new home was $30,400 lower in 2023 than in 2022. Meanwhile, an estimated 668,000 new homes were sold in 2023, 4.2% more than 2022’s figure of 641,000.
According to Alicia Huey, chairman of the NAHB and a custom homebuilder from Birmingham, Alabama, there is an expectation that sales will rise in 2024.
