ShareIn each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest in new home sales data.
- New home sales fell for the second consecutive month. Sales fell 7 percent in December following a 4 percent decline in November. Though new home sales generally reflect the degree of new home construction – that is, if more homes are built then there will be more new home sales - the latest weakness is a part of weakening demand, which has become hampered by increasingly challenging affordability conditions.
- Even with softer demand, new home prices continue to rise. In December, a typical new home sold for $270,200, up 4.6 percent from one year prior. New home prices partly reflect construction material costs, which are incorporated into the supply and demand dynamics. The gap between new and existing home prices is sizable in the current environment, suggesting existing homes could be a better buy.
- The inventory of newly built homes is essentially at a 50-year low. More new home construction is needed. Housing starts need to rise by at least 50 percent quickly to help relieve both new home inventory and existing home inventory. The speed of sale is quick. In the latest month, it took 3.2 months to sell a new home compared to over 12 months during the depths of the housing market crash.
- Details on the data are as follows. In December 414,000 new homes went under contract compared to 445,000 in November. Because the data follows the standard reporting format (seasonally adjusted and annualized), the latest two-month softness is more than the usual slowdown that occurs at the end of the year. There is no data for new home sales closings. It is only contract signings that are reported.
