Elevated mortgage rates acted as a drag on new home sales in November, but with the economy now apparently past peak interest rates for this cycle, sales are expected to rise as we move into the new year.
Sales of newly built, single-family homes in November fell 12.2% to a 590,000 seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in November was the lowest annual rate since November 2022 but sales are up 3.9% on a year-to-date basis due to a lack of resale inventory.
New home sales were weaker in November as mortgage interest rates likely reached a cycle peak at a 7.79% per Freddie Mac at the end of October. Mortgage rates have since moved lower, with Freddie Mac reporting a 30-year fixed-rate of 6.67% this past week. This is consistent with the NAHB/Wells Fargo increasing in December, with builders indicating they expect a rise in future sales. Sales volume for new construction will improve in the months ahead.
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the November reading of 590,000 units is the number of homes that would sell if this pace continued for the next 12 months.
New single-family home inventory in November jumped to the highest level since November 2022, rising 16.5% from the previous month to 451,000. This represents a 9.2 months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced. However, the market currently requires a higher level of new construction inventory due to a persistent lack of resale inventory. Newly built homes accounted for 31% of total homes available for sale in November, compared to an approximate 12% historical average.
The median new home sale price in November was $434,700, up 4.8% from October, and down 5.9% compared to a year ago.
Regionally, on a year-to-date basis, new home sales are up in all four regions: up 4.9% in the Northeast, 3.6% in the Midwest and 4.4% in the South and 2.6% in the West.