New-Home Sales Rose in December in Defiance of Higher Mortgage Rates

Sales of newly constructed single-family homes rose last month, and prices ticked higher, defying mortgage rates that stuck close to 7%.

Signed contracts for new homes were at a seasonally adjusted annual rate of 698,000 in December, up 3.6% from the prior month, the U.S. Census Bureau reported on Monday. December’s sales pace was up 6.7% from a year earlier.

The median sales price of new houses sold in December was $427,000, up 6% from November and a 2% gain from a year earlier.

“More affordable new inventory is driving sales, with 20% of December’s sales occurring on homes priced under $300,000, up from 15% last year,” says Realtor.com® Senior Economist Joel Berner. 

At the end of December, there were 494,000 newly built homes on the market on a seasonally adjusted basis, up 10% from a year ago.

It represented a supply of 8.5 months at the current sales rate, down from 8.7 months in November, but higher than the 8.2 months seen in December 2023.

“In the short term, we don’t think the large overhang of new homes for sale will stop builders from starting new projects, but it will likely start putting downward pressure on the median price of a new home,” says Thomas Ryan, North America economist for Capital Economics.

New-home sales are based on signed contracts, and can reflect homes in any stage of construction: not yet started, under construction, or completed and ready for move-in.

New-home market outperforms existing homes in 2024

The uptick in new-home sales follows data showing that sales of previously-owned homes also rose last month, ending 2024 on a bright note after a mostly muted year for the housing market.

Existing-home sales, which are based on closings, rose 2.2% on the month in December to a seasonally adjusted annual rate of 4.24 million, the strongest pace since February 2024, the National Association of Realtors® reported on Friday.

Despite the year-end boost, 2024 was still the slowest year for existing-home sales since 1995—a remarkable feat, considering that the U.S. has some 70 million more people now than it did 30 years ago.

New-home sales performed better across 2024, with an estimated 683,000 new homes sold last year, up 2.5% from 2023.

Regionally, new home sales were strongest in the Midwest across 2024, up 19% in from the prior year. Sales also rose 1.7% in the Northeast and 2.6% in the West, in the South they dipped 0.2%.

“There are two main reasons the new home market was stronger in 2024,” says Bright MLS Chief Economist Lisa Sturtevant.

“First, in many markets, there was simply more new home inventory and some buyers who might have wanted to purchase an existing home were instead looking at new construction. Second, home builders were able to offer prospective buyers concessions, including rate buydowns, to entice them to new home communities,” she explains.

The supply of new homes has consistently outpaced that of existing homes in recent years, as construction activity has increased, and fewer homeowners put their houses on the market for fear of losing the low mortgage rates they had previously locked in.

Across 2024, the supply of existing homes averaged just 3.7 months, compared with 8.3 months supply for newly built homes.

“The balance between the new and existing home markets could change in 2025,” says Sturtevant. “The available supply of existing homes for sale is increasing as more current homeowners are deciding to sell. And while mortgage rates remain elevated and builders will still promote rate buydowns, those concessions get more difficult as profit margins narrow.”