A Strong Finish For New Home Sales in December
Sales were up at the end of 2024, and for the full year, increased by 2.5% over 2023 — in contrast to existing home sales, which fell short of 2023 numbers.
The real estate industry had to contend with a fair amount of bad news in 2024, but sales of newly built homes were often a bright spot, and they ended the year strong.
Increasing 3.6% from November and jumping 6.7% year-over-year, December’s new home sales helped offset the slowdown in existing home sales last year — though not enough to make a meaningful difference in overall transactions.
For the entirety of 2024, an estimated 683,000 new homes were sold. That’s a 2.5% increase compared to 2023, according to the U.S. Census Bureau, but a fairly small number relative to existing home sales, which came in at just over 4 million in 2024 — falling slightly short of 2023 sales, and the lowest level since 1995.
What to expect in 2025: Housing permits and starts were also up in December, suggesting more completions in the coming months.
And based on current economic conditions, the National Association of Home Builders is forecasting “a slight gain for sales in 2025,” said Robert Dietz, NAHB chief economist, specifically calling out improvements in the labor market.
“Builders are cautiously optimistic about the building market given a post-election policy reset that seeks to eliminate unnecessary regulations,” added Carl Harris, NAHB chairman. On Jan. 20, Donald Trump issued an “emergency price relief” order that aims to limit regulations related to home construction.
But other policies coming out of the new Trump administration, including proposals for steep tariffs and mass deportations, could negatively affect the construction industry, cautioned Veterans United, which forecast a reduction in housing starts “in response to higher material and labor costs, further constraining the supply of affordable homes.”
It’s also possible that builders will find it more challenging to compete with the existing home market, which could lead to a slowdown in new home sales in 2025, suggested Lisa Sturtevant, chief economist at Bright MLS.
“The available supply of existing homes for sale is increasing as more current homeowners are deciding to sell,” Sturtevant said. “And while mortgage rates remain elevated and builders will still promote rate buydowns, those concessions get more difficult as profit margins narrow.”
Demand is out there: Despite those unknowns, there is plenty of pent-up demand after years of under-building, said Mark Fleming, chief economist at First American. He noted that the U.S. is building about 10 new homes per 1,000 households, which is the same level as 1991. During the peak construction period post World War II, it was 44 units per 1,000 households.
“The key to fixing the affordability crisis is to increase the amount of construction in this country to keep up with new demand every year as well as make up for the under-building that has now been occurring for decades,” Fleming said.
Median price down: The median price of new homes sold was $420,100 in 2024, down from $428,600 in 2023, according to the report. Builders have been constructing smaller homes, which would be a factor in the price, but they’ve also been offering more concessions to help close deals in an elevated mortgage rate environment.
Regional differences: New home sales were strongest in the Midwest, up 19% in 2024 compared to 2023. The West was slightly above the national average at 2.6%, while the Northeast increased 1.7%. The South had a slight decline, falling 0.2% year-over-year.
Inventory: For new homes, supply was at 8.5 months at the end of December, up slightly from a year before. Combined with the existing home inventory of 3.1 months, that puts overall inventory at 4 months, which Dietz said is the lowest since April 2024.
Source: Real Estate News
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