December saw sales of newly constructed homes recede monthly 0.4%, a disappointing end to the year after low rates propelled months of initially strong reports.
The slight decrease put December’s seasonally adjusted annual rate at 694,000, according to estimates released by the U.S. Census Bureau and the Department of Housing and Urban Development. While that figure remains 23.0% above December 2018’s estimate of 564,000, it’s the weakest rate since July and fell short of several economists’ expectations.
The report also cast the strength of the previous reports into question after downwardly revising November’s figure, which had originally come in at a strong annual rate of 719,000 but now stands at 697,000.
“After a string of blockbuster reports, December’s new home sales data was a disappointing stumble right at the finish line of what was otherwise the best year for new home sales since before the Great Recession,” Zillow economist Matthew Speakman wrote on the company’s blog. “These numbers could serve as a bit of a wake-up call for builders that have grown increasingly confident in the demand for the homes they’ve been putting up with growing vigor since the summer.”
New-home sales have now fallen month-over-month after downward revisions for the past three months, bringing what looked to be a strong end of 2019 into murkier territory. Still, the pace of new-home sales did speed up during the second half of the year. Robert Dietz, chief economist at the National Association of Home Builders, observed that the acceleration returned the new-home sales pace to the upward trajectory it had enjoyed since the end of the Recession, course-correcting after it had slowed to start the year.
And as Speakman noted, the estimated 681,000 new homes sold in 2019 are the highest since the downturn and a 10.3% improvement on 2018’s estimate of 617,000.
“This general rising trend for new home sales, after the housing affordability crunch of 2018, suggests additional construction gains in 2020,” Dietz said. “Sales are being supported by ongoing low interest rates and historically low unemployment.”
As for the supply of new homes, the Census report placed the seasonally-adjusted estimate of new houses for sale at the end of December at 327,000 — a supply of 5.7 months at the current sales rate. The median sales price of new homes sold in December was $331,400, up from the revised November median of $320,900.
“With overall inventory as scarce as it is currently, it’s clear that more construction is desperately needed,” said Speakman. “And low mortgage rates, a robust labor market and stabilizing geopolitical tensions suggest that demand for housing will stick around, and buyers are hungry for more housing options.”
