US new-home sales jump at end of 2024

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.  

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.

In 2025, builders will see growing competition from the home-resale market in parts of the US Sun Belt, especially Texas and Florida, Bloomberg Intelligence analyst Drew Reading said in a December note. Overall, the supply of previously owned homes is still 17% below pre-pandemic levels, but in Cape Coral, Florida, it's up almost 37% from 2019, and it's up 42% in Austin, Reading found. For buyers, though, that should help lower prices, he said.

The monthly pace of new-home sales in the West rose more than 20% to a three-month high, Monday's data showed. In the South — the biggest homebuilding region — sales fell 2.1%, while purchases in the Midwest decreased 3.3%. In the Northeast, they rose nearly 42%.

New-home sales are seen as a more timely measurement of housing-market activity than purchases of previously owned homes, which are calculated when contracts close. However, the data are volatile. The government report showed 90% confidence that the change in new-home sales ranged from a 16.1% decline to a 23.3% gain.

The National Association of Realtors will publish data on monthly contract signings of existing homes on Thursday with the release of December pending-home sales figures.