New home sales increased in December, a sign that new home sales have continued to rebound in recent months. Last month, new home sales rose 2.3% to a seasonally adjusted annual rate of 616,000, according to data published by the US Census Bureau and the Department of Housing and Urban Development (HUD).
But while mortgage rates they’ve been tumbling, and while builders have been offering incentives to buyers, it wasn’t enough to fuel new residential sales in 2022.
Additionally, the median sales price for new homes sold in December fell to $442,100 and the median sales price dropped to $528,400. In November, the median sales price for new homes was $471,200 and the median sales price was $543,600, according to the data.
The rebound in new home sales last month was due in large part to falling mortgage rates in December, which occurred after the 30-year mortgage rate peaked above 7% in October and November. . Builder incentives also played a role, according to Holden Lewis, a housing and mortgage expert at NerdWallet.
“Homebuilders reduced prices to stimulate sales,” Lewis said in a statement. “In December, the typical new home cost almost $50,000 less than it did in October. The combination of lower rates and lower prices boosted sales in December and could be doing the same in January.”
The seasonally adjusted estimate of new homes for sale at the end of December was 461,000, which represents nine months of supply at the current sales rate.
While new home sales have been at a upward trend in recent months, the rate is below 2021 levels. Compared to sales of 771,000 in 2021, about 644,000 new residential homes were sold in 2022, a 16.4% year-over-year decline.
“The housing market cooled during the fall and early winter of 2022, and new home sales followed suit with new sales well behind 2021 and receding closer to pre-pandemic levels.” Nicole Bachaud, senior economist at Zillowhe said in a statement.
Despite homebuilders’ attempts to attract buyers, affordability challenges made it difficult for buyers to enter the market, Fannie said.
And small drops in rates and home prices may not produce enough purchasing power for buyers, both of which are expected to limit buyer entry into the market.
“Builders are almost throwing incentives at buyers to lure them back into the new home market, but that doesn’t seem like enough to combat high mortgage rates and prices,” Bachaud said.
Mortgage applications for new homes in December decreased by 5% compared to November and by 25.2% year-on-year, according to the Mortgage Bankers Association.
The decline in activity was in line with single-family home starts, which were 32% lower than a year ago, and were indicative of higher mortgage rates and a weakening economy that delayed buyers late in the year. past, according to Joel Kan, MBA vice president and deputy chief economist.
However, improving builder confidence, lower rates and increased demand for mortgages offer optimism in January, according to economists.
“The housing market still needs more beginners and entry-levels. About 644,000 new residential homes were sold in 2022, a 16.4% decrease from homes at the 2021 level, especially as current demographic trends point to the possibility of more young households becoming homeowners in a near future. The new construction of these units will help these buyers enter the real estate market,” Kan said.
“We may see the market thaw out before the spring buying season begins, which will hopefully translate to more construction to add much-needed housing supply when it’s needed most,” Bachaud noted.
