Despite rising mortgage rates and declining desire for home purchases, new home sales increased somewhat last year. However, there was a price for that increase.
The U.S. saw a positive year-end with a 3.6% increase in new home sales in December.
Builders sold more homes in 2024 than the year before, with new-home sales up 2.5% annually, but high borrowing rates that affected both home purchasers and builders.
The health of the resale market contrasts sharply with the rise in new-home sales.
Due to a dearth of available homes and high housing expenses, existing-home sales fell to their lowest level since 1995.
See also: Why 2024 was possibly the most difficult year in 30 years for house sellers and buyers
An increase in sales in December contributed to the annual increase. The Commerce Department said on Monday that the rate of new single-family home sales in December increased to 698,000.
Seasonally adjusted, the figure represents the number of residences that would be constructed over a full year if builders kept up their monthly pace.
On Wall Street, the new-home sales number was higher than anticipated. According to economists polled by the Wall Street Journal and Dow Jones Newswires, new home sales in December were expected to decline to 671,000.
In 2024, new home prices decline.
Sales increased as high mortgage rates put pressure on the price of new homes.
The median price of a new single-family home sold in the United States dropped to its lowest level in three years, in contrast to resale home prices, which broke the previous record in 2024.
In 2024, the median sales price was $420,100, a decrease from the previous year’s median of $428,600.
According to federal government data, builders sold between $300,000 and $399,999 for about 29% of their homes in 2024. Out of all the price groups, that is the largest share. The price range for one-fifth of newly sold homes was between $400,000 and $499,999.
Due to a significant supply deficit in the resale market, the price difference between new and resale properties has been closing over the past year. The low mortgage rates that current homeowners are stuck into are preventing new listings and driving up home values.
Ten years ago, the difference was even greater: in 2014, the median price of a new single-family home sold in the United States was approximately $283,200, while the typical price of an existing single-family home sold was $208,900.
In general, new house building and sales continue to be a “bright spot” in a “frozen” housing market, according to a note from Thomas Ryan, a Capital Economics economist specializing in North America.
And the future appears bright.
“We expect new-home sales to continue to grind higher this year, although builders will face growing competition from increasing resale supply,” Ryan stated.
However, if builders provide incentives to help them afford homeownership, he said, buyer demand, especially from “budget-conscious first-time buyers,” should continue to be high.