New home sales in December totaled 811k, 50k more than expected but partially offset by a downward revision of 19k to 725k. As this number is volatile each month, we’ll smooth it out to see a 3 month average of 728k vs the 6 month average of 714k and the 2021 average of 765k. The increase was driven by ‘homes not started.’ The availability of labor and materials will certainly dictate the timing of delivery.
While the number of homes for sale rose, as the pace was less than contract signings months’ supply fell to 6 from 6.6. The median price was up 3.4% y/o/y but this is also very volatile month to month and mix has a big influence. There was a slight downtick in home sales priced over $500k and a jump for those priced between $200-$299k.
Bottom line, at least for new homes, interestingly the supply situation at 6 months and which it’s been at or above for the past 6 months, is back to its long term average. There is a growing debate over whether we are on the cusp of building too many new homes relative to the slow pace of household formation and notwithstanding all the supply issues we are fully aware of. I know that seems weird when for existing homes the supply is still so tight and those supply problems are still clear. I do think though this could be more of an issue of higher priced homes as lower priced ones are in high demand, especially when renting right now is so expensive. Keep in mind too with today’s number, the average 30 yr mortgage rate averaged 3.3% in December vs 3.23% in November and what we’ve seen this month at 3.63%.
I always like to include a 20 yr chart when highlighting the housing stats because you can visualize the mid 2000’s bubble when compared with today in terms of number of homes built, pricing and the pace of transactions for both existing and new homes.
New Home Sales