Report: US new-home sales going strong

Housing market shows resilience despite economic headwinds

Report: US new-home sales going strong

Sales of new single-family homes in the US ended 2024 on a high note, with December purchases rising 3.6% to an annualized rate of 698,000, according government figures released Monday. This marked the second consecutive year of growth, as annual sales climbed 2.5% to 683,000 homes, compared to 2023.

The surge in December exceeded economist predictions, who had projected an annualized pace of 675,000, according to a Bloomberg survey. Notably, the Western US experienced the strongest monthly gains, with purchases increasing over 20% to a three-month high. In contrast, sales fell 2.1% in the South, the largest homebuilding region, and decreased 3.3% in the Midwest. The Northeast recorded a significant increase of nearly 42%.

Prices and incentives drive demand

The median sale price of a new home climbed 2.1% in December to $427,000. Since 2019, home prices have risen by nearly 30%, driven by increased demand and construction costs.

Builders have responded by offering incentives to attract buyers amid high mortgage rates, which reached 7% earlier this month. These incentives, including rate buydowns and price cuts, have become common, with more than 60% of builders utilizing such strategies, according to the National Association of Homebuilders. Bloomberg noted that about 30% of builders are also reducing prices.

The market for new homes has fared better than the resale market, where inventory remains constrained. Builders have maintained a supply of 494,000 new homes as of December, the highest level in 17 years.

Looking ahead to 2025

The outlook for new-home sales in 2025 remains positive. Mortgage giant Fannie Mae anticipates continued strength as builders adapt to demand for smaller, more affordable homes and maintain incentive offerings. Construction is expected to be concentrated in the South and Western mountain states, with metropolitan areas such as Houston, Dallas, Phoenix, Atlanta, and Charlotte leading activity.

However, competition from the existing-home market is likely to grow, particularly in parts of the Sun Belt, including Texas and Florida. Bloomberg Intelligence reports significant inventory increases in regions like Cape Coral, Florida, where resale listings have risen 37% since 2019, and Austin, Texas, where they have jumped 42%. This expanding supply of previously owned homes could exert downward pressure on prices, benefiting buyers.

Volatility in the market

New-home sales data, considered a more immediate indicator of housing market trends than existing-home sales, remain subject to fluctuations. The December report revealed a 90% confidence range, with potential changes varying from a 16.1% decline to a 23.3% gain.

Meanwhile, the National Association of Realtors is set to release December figures for pending sales of existing homes on Thursday.

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