Sales of new single-family homes in December hit a seasonally adjusted annual pace of 811,000 units, a monthly gain of 11.9% that brought sales to their highest level in nine months, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
The big number handily beat consensus expectations of economists, especially as it came in the midst of the usual seasonal slowdown. This suggests still-strong demand from buyers despite short supply, strong competition and rising prices.
Sales likely got a boost from an uptick in completed homes during the fall, especially homes in more affordable price tiers, as well as due to some milder weather in the Midwest. Sales in that region vaulted 56.4% month over month from a revised annualized pace of 55,000 units in November to 86,000 units in December.
December’s surge also is likely, at least in part, due to buyers’ attempts to lock in new homes before mortgage rates rise even further. The new-home sales report was released on the same day that the Federal Reserve’s Open Market Committee gave a clear indication that baseline rates could see an increase in March, which is likely to further sharpen the already upward trajectory of rates.
“The double-digit sales gain in December was likely due to motivated buyers who were seeking to sign sales contracts before interest rates move higher at the start of 2022,” said Robert Dietz, chief economist for the National Association of Home Builders (NAHB). “Higher interest rates this year will price out some buyers from the market, but the existing-home inventory shortfall remains.”
The December sales jump brought a strong end to a year that saw total new-home sales dip by 7.3% annually. The decrease is a reflection of the residential construction industry’s continued struggle against bottlenecks in the supply chain. Such issues have drawn out the buildouts of new homes nationwide, and while input woes cooled somewhat during the fall, they worsened again during the winter, halting a promising influx to inventory.
The end-of-year sales surge kept the number of available new homes for sale at a six-month supply. New builds are abundant, with the latest figures revealing 769,000 single-family homes currently under construction, the most in 15 years.
Interestingly, the median price of a new home in December was $377,700, down from $416,100 in November. The dip comes from the outsized increase in homes sold during December that were priced at or below $300,000. Again, a moderate winter may have played a factor here as homes in the Midwest (and in the South, where new-home sales rose 14.9% monthly) tend to be less expensive than those in the Northeast and West regions.
Homes priced at or below $300,000 represented only 7% of U.S. new-home sales in November, but that share nearly doubled to 13% the following month. The median price, however, was up from $365,300 in December 2020, chiefly due to increased prices for input materials, NAHB reported.