New Home Sales Expected to Increase in 2024
Increased mortgage rates negatively impacted new home sales in November. However, with the economy now seemingly beyond the peak interest rates for this cycle, sales are anticipated to increase as we enter the new year.
According to recently released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, sales of newly constructed, single-family homes in November experienced a 12.2% decline, reaching a seasonally adjusted annual rate of 590,000. While this represents the lowest annual rate since November 2022, year-to-date sales have risen by 3.9%, attributed to a scarcity of resale inventory.
According to the NAHB, 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.