After a surge in the pace of new home sales in the middle of the year, the monthly growth rate of newly built single-family home sales slowed at the end of 2020. Sales exceeded construction starts by a historic margin at the end of the summer. This necessitated an increase in starts and some slowing of sales. Nonetheless, the acceleration of sales in 2020 has left new home inventories down significantly year-over-year. The total volume of 2020 new home sales was 18.8% higher than in 2019.
According to estimates from the Census Bureau and HUD, December new home sales increased 1.6% for the month to a 842,000 seasonally adjusted annual rate, off of downwardly revised November estimate (829.000). The revised November pace is the lowest rate since May. Despite the recent slowing, the December sales rate was 15% higher than a year ago, as housing demand continues to be supported by low interest rates, a renewed consumer focus on the importance of housing, and solid demand in lower-density markets like suburbs and exurbs. Housing affordability headwinds will increase in 2021, due to price growth and interest rates trending higher.
Looking back to the spring, the April data (570,000 annualized pace) marks the low point of sales for the 2020 recession. The April rate was 26% lower than the prior peak, pre-recession rate set in January. Sales then mounted a historic surge from April to July, outpacing gains in actual construction.
Sales-adjusted inventory levels increased somewhat in December, coming in at a 4.3 months’ supply, after four consecutive months below an incredibly low reading of 3 from July to October. Inventory by count increased in December, but remains 6% lower than a year ago. Inventory of completed, ready-to-occupy homes is down 44% over the last year, down to a count of just 42,000 homes nationwide.
Housing affordability headwinds are rising for 2021, due to supply-side challenges such as elevated lumber costs and prospects for increased regulatory burdens associated with land development and building. The median sales price in December was $355,900. The median price of a new home sale a year earlier was $329,500, as prices have increased in 2020 with gains in building materials and larger home sizes.
Regionally, on a year-to-date basis new home sales were up in all four regions in 2020: 21.2% in the Northeast, 24.2% in the Midwest, 17.9% in the South, and 18.9% in the West.