New Home Sales Surprisingly Strong to End Year

Falling interest rates in the closing weeks of 2023 helped to bring buyers off the sidelines and provide a boost for new home sales. Sales of newly built, single-family homes in December increased 8.0% to a 664,000 seasonally adjusted annual rate from an upwardly revised reading in November, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in December is up 4.4% from a year earlier. On an annual basis, new home sales totaled 668,000 in 2023, up 4.2% from the 2022 figure of 641,000. 

A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the December reading of 664,000 units is the number of homes that would sell if this pace continued for the next 12 months.  

New single-family home inventory in December remained elevated at a level of 453,000, up 0.4% compared to a year earlier. This represents an 8.2 months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced.  

A year ago in January, there were 72,000 completed, ready–to–occupy homes available for sale (not seasonally adjusted). By the end of December, that number increased 22.2% to 88,000. However, completed, ready–to–occupy inventory remains just 19% of total inventory and homes under construction account for 58% of the inventory. Homes that have not started construction when the sales contract is signed account for 23% of new homes sold in December.  

The median new home sale price in December was $413,200, edging down 3.0% from November, and down 13.8% compared to a year ago. Decline in home size and stability in building material costs, especially lumber prices, have contributed to a fall in home prices. In terms of affordability, the share of entry-level homes priced below $300,000 has been steadily falling in recent years. Only 16% of the homes were priced in this entry-level affordable range, while 35% of the homes were priced above $500,000. Most of the homes (49%) were priced between $300,000-$500,000.  

Regionally, on a year-to-year basis, new home sales are up in all four regions: up 3.5% in the Northeast, 3.6% in the Midwest, 5.2% in the South. and 2.1% in the West.