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New Home Sales Inch Higher in December but Market Weakness Remains

While new home sales posted a modest gain in December, elevated mortgage rates and higher construction costs continue to hinder housing affordability and put a damper on consumer demand. Sales of newly built, single-family homes in December increased 2.3 percent to a 616,000 seasonally adjusted annual rate from a downwardly 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. New home sales were down 16.4 percent in 2022 compared to the previous year.

More new home sales data

New single-family home inventory remained elevated at a nine-month supply (of varying stages of construction). A measure near a six-months supply is considered balanced. The count of homes available for sale, 461,000, is up 18.5 percent over last year. 

A year ago, there were just 33,000 completed, ready-to-occupy homes available for sale. By December 2022, that number increased 115 percent to 71,000, reflecting flagging demand and more standing inventory due to lower sales. Completed, ready to occupy inventory however, remains just 15 percent of total inventory. 

The median new home sale price in December was $442,100, down 3.7 percent from November, however, it is still up 7.8 percent compared to last year due to higher construction costs. 

Regionally, on a year-to-year basis, new home sales fell in all four regions; down 8.2 percent in the Northeast, 22.1 percent in the Midwest, 13.0 percent in the South and 23.5 percent in the West. 

What NAHB says

"Builder incentives and declining mortgage rates during the month of December helped push new home sales up for the month," says Jerry Konter, chairman of the National Association of Home Builders. "However, because of higher construction costs and decreasing affordability, sales are down more than 25 percent compared to a year ago."

"In a further sign of decreasing housing affordability, even though the median home price is down for the second straight month, it is still up 7.8 percent compared to last year," says Danushka Nanayakkara-Skillington, NAHB's assistant vice president for forecasting and analysis. "Elevated inventories are another concerning sign of a soft market."