(Bloomberg) -- Sales of new US homes ended 2024 on a high note in December as customers took advantage of incentives from builders, leading to a second straight year of increased purchases.
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The annual pace of new single-family home sales accelerated 3.6% to 698,000 last month, reflecting a sharp advance in the West, government figures released Monday showed. The median estimate in a Bloomberg survey of economists predicted 675,000 annualized sales. For the full year, customers purchased 683,000 homes, up about 2.5% from 2023’s total.
Median sale prices, meantime, rebounded despite a gradual cooling trend, increasing 2.1% to $427,000. Prices continue to pinch consumers, having risen nearly 30% since the end of 2019.
The market for new homes has held up better than that for existing ones thanks in part to widespread use by builders of incentives, including mortgage rate “buydowns” in which they make up-front payments on customers’ behalf to lower mortgage costs. More than 60% of builders report using sales incentives, data from the National Association of Homebuilders show, while 30% say they are cutting prices. Mortgage rates rose to 7% earlier this month for the first time since July.
This year, new-home sales should remain “solid” as builders keep offering customers incentives and tweak their business model to offer smaller, more affordable homes, mortgage giant Fannie Mae said in its 2025 outlook. Much of the construction, however, will occur in the South and western mountain states. Of 750,000 single-family permits issued through October, a fifth occurred in five metropolitan areas: Houston, Dallas, Phoenix, Atlanta and Charlotte, North Carolina, the group said.
Unlike the existing-home market, where the available inventory is only slowly rebuilding from historic pandemic-era lows, builders have plenty of new homes to show customers. The supply on the market rose to 494,000 in December, the most in 17 years.
What Bloomberg Economics Says...
“The volume of new home sales increased in December amid improved sentiment during the month. Inventories continue to rise despite the higher sales, however, and the share of new-home listings for which construction has been completed is rising too. We think that will add headwinds for home-price appreciation in the year ahead.”