New home sales spiked in December as cooling rates encouraged purchase-shy buyers to make the leap.
That’s according to data from the U.S. Census Bureau and the Department of Housing and Urban Development, which reported sales up by 8% from October to a seasonally adjusted annual rate of 664,000, a jump from the month priors’ revised rate of 615,000.
December saw rates cool to the mid-6’s, a process that began in November but needed time to bear out fully. The data suggests potential buyers who were cautious at first eventually came to terms with slightly lower rates and jumped into the market.
New home sales were up 4.4% from the same time last year.
There were 453,000 new homes for sale at the end of December, representing an 8.2-month supply at the current sales rate.
The median sales price of new houses sold in December 2023 was $413,200 — down by more than $21,000 from the month prior — while the average sales price was $487,300.
Activity is expected to be subdued for the first half of 2024. But analysts bet that the Central Bank will make significant rate cuts by the middle of the year, improving affordability for working Americans.
Combined with a wave of new construction, cooling interest rates and home prices should encourage increased sales in the last half of 2024.
Laying a foundation for affordability is the best path to a functional housing market in the U.S., analysts say. Producing enough inventory to reduce competition may be the only way to give average Americans a leg up.
“If price increases continue at the current pace, the country could accelerate into haves and have-nots. Creating a path towards homeownership for today’s renters is essential. It requires economic and income growth and, most importantly, a steady buildup of home construction,” NAR Chief Economist Lawrence Yun recently warned.
Both renting and buying are a “financial stretch” for working Americans, but renting is the most affordable option.
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