Sales of new single-family homes in December beat the market’s median estimate by a wide margin, rising by 11.9% to 811,000 on an annual basis, according to data released by the Commerce Department on Wednesday.
Although November’s reading for the month-over-month change was revised down to 1.7%, that marked the second month of back-to-back increases of more than 11%. The last period of such robust growth was from May to July in 2020, the onset of the pandemic housing boom.
This time, the main driver for the increase was different: It was because of the strong rebound in supply.
The clear evidence came from the fact that despite the sharp increase in sales, the median price for new homes dropped by 9.2% on the month to $377,700, following a 1.3% decline in November.
That was a result of homebuilders cashing in on constantly replenishing supply, driven by torrid demand. Since last June, the inventory of new homes has remained above six months, reaching its peak in October at 7.2 months.
For the coming months, new home sales will most likely be on a choppy run as new supply has been disrupted by the surge of the omicron variant in late December and January.
But the underlying trend will continue to move up for new single-family homes as recent data on completions, starts and permits all pointed to strong increases in supply.
The largest increase in sales came from the South—up by 59,000—while the Northeast had a decrease of 5,000 in sales. There were 403,000 homes for sale at the end of December, up by 6,000 from November.