Average New Home Price is Down 14% from the Peak
CALCULATEDRISK
By Bill McBride
The Census Bureau reports New Home Sales in December were at a seasonally adjusted annual rate (SAAR) of 664 thousand. The previous three months were revised up, combined.
Sales of new single‐family houses in December 2023 were at a seasonally adjusted annual rate of 664,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 8.0 percent above the revised November rate of 615,000 and is 4.4 percent above the December 2022 estimate of 636,000.
An estimated 668,000 new homes were sold in 2023. This is 4.2 percent above the 2022 figure of 641,000.
emphasis added
The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.
New home sales were close to pre-pandemic levels. The second graph shows New Home Months of Supply.
The months of supply decreased in December to 8.2 months from 8.8 months in November. The all-time record high was 12.2 months of supply in January 2009. The all-time record low was 3.3 months in August 2020. This is well above the top of the normal range (about 4 to 6 months of supply is normal).
“The seasonally‐adjusted estimate of new houses for sale at the end of December was 453,000. This represents a supply of 8.2 months at the current sales rate.”
On inventory, according to the Census Bureau:
“A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted.”
Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed. The third graph shows the three categories of inventory starting in 1973.
The inventory of completed homes for sale (red) – at 81 thousand – is more than double the record low of 32 thousand in 2021 and early 2022. This is close to the normal level of completed homes for sale.
The inventory of homes under construction (blue) at 265 thousand is very high, and about 17% below the cycle peak in July 2022. The inventory of homes not started is at 107 thousand – this is the all-time high.
The fourth graph shows new home sales for each month, Not Seasonally Adjusted (NSA), for a few selected periods. Black is the maximum sales per month during the bubble (2005) and light gray is the minimum sales during the bust (2008 – 2011). The most recent five years are shown (2019 through 2023).
In December 2023 (red column), 50 thousand new homes were sold (NSA). Last year, 47 thousand homes were also sold in December. The all-time high for December was 87 thousand in 2005, and the all-time low for December was 23 thousand in 2010.
The next graph shows new home sales for 2022 and 2023 by month (Seasonally Adjusted Annual Rate). Sales in December 2023 were up 4.4% from December 2022.
Annual new home sales in 2023 were at an estimated 668,000, up 4.2% from 641,000 in 2022.
Almost 5 Months of Unsold Inventory Under Construction
The next graph shows the months of supply by stage of construction. “Months of supply” is inventory at each stage, divided by the sales rate.
There are 1.5 months of completed supply (red line). This is close to the normal level.
The inventory of new homes under construction is at 4.8 months (blue line). This has declined from 7 months in July 2022, but is still a much larger than normal number of homes under construction.
And 1.9 months of potential inventory that have not been started (grey line) – about double the normal level. Homebuilders are probably waiting to start some homes until they have a firmer grasp on prices, mortgage rates and demand.
Median Prices 17.6% Down from Peak
And on prices, from the Census Bureau:
The median sales price of new houses sold in December 2023 was $413,200. The average sales price was $487,300.
The following graph shows the median and average new home prices. The average price in December 2023 was $487,300 down 14% year-over-year. The median price was $413,200 down 14% year-over-year. Both the median and the average are impacted by the mix of homes sold.
The median price was down 16.8% from the peak in 2022, and the average prices was down 14.3% from the peak.
The last graph shows the percent of new homes sold by price.
About 14% of new homes sold were under $300K in December 2023. This is up from a low of 4.9% in November 2022, but down from around 80% in 2002. In general, the under $300K bracket is going away (inflation has pushed prices higher).
Last month, 63% of sales were under $500K and 37% over $500K. The percent over $500K is down from 49% at the peak in 2022. Homebuilders are building less expensive homes to keep up volumes.
Conclusion
Sales were above expectations of 650 thousand SAAR, and sales for the three previous months were revised up, combined.
Annual sales were up 4.2% in 2023 and will likely increase further in 2024.
New home sales are counted when the contract is signed, and mortgage rates were very high in November – and that probably suppressed sales. Mortgage rates declined in December, and that gave sales a little boost.