New home sales increased 2.3% in December compared with November but remained down 26.6% compared with December 2021, according to estimates from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
As of the end of the month, sales of new homes were at a seasonally adjusted annual rate of 616,000, up from 602,000 in November but down significantly from 839,000 a year earlier.
An estimated 644,000 new homes were sold in 2022, a decrease of 16.4% compared with 2021.
The median sales price of new home sold in December was $442,100. The average sales price was $528,400.
As of the end of the month, there were 461,000 new homes available for sale in the U.S. – about a nine-month supply at the current sales rate.
Odeta Kushi, deputy chief economist for First American, notes that the new-home sales report “does not make adjustments to the new-home sales figures to account for cancellations of sales contracts. With rising cancellations, there may be an overestimation of sales.”
At the same time, “lower mortgage rates, builder incentives, and a lack of existing-home inventory might make new homes attractive enough to entice more buyers,” Kushi says in a statement.
“The latest uptick in builder confidence is a sign that builders believe lower mortgage rates may lift demand,” she adds.
The lack of inventory has never been worse. The issue now is how fast builders will complete projects already started.
“From the year 2000 up until the pandemic, new homes on average made up approximately 11 percent of total inventory,” Kushi says. “In December, new homes made up approximately 29 percent of total inventory. However, only 71,000 of the total new-home inventory is completed and ready to occupy. That’s only 15 percent of the new-home inventory. This count has been increasing in recent months and is up 115 percent compared with a year ago, reflecting waning demand. Homes under construction account for the bulk of total new-home inventory at approximately 63 percent.”
Higher builder costs remain a headwind to building more entry-level homes.
“One year ago, 18 percent of new-home sales were priced below $300,000,” Kushi says. “In December 2022, only 11 percent of new-home sales were priced under $300,000. The pre-pandemic level in December 2019 was 41 percent.”