New Home Sales Close Year with Strong Momentum

Unlike sales of existing homes, which fell in December by 6 percent, new home sales finished 2021 on a positive note. Sales of new single-family homes reached an 811,000-  unit annual rate in December, an impressive 11.9 percent increase from November. December’s new home sales are running at the highest pace in 9 months (Figure 1.)

Despite the strong year-end gains, fewer new homes were sold in 2021 than in 2020. A total of 762,000 homes were sold in 2021, a 7.3 percent drop from the previous year. That shortfall snapped a streak of ten consecutive years of an increase in new home sales.

Three of the four U.S. regions contributed to December’s gain (Figure 2.).  The Northeast was the only region to post a decline, with its sales of 27,000 units less than 3 percent of the 811,000 U.S. total.

Despite the strong year-end gains, fewer new homes were sold in 2021 than in 2020.

Sales in the West, the second largest, were virtually flat compared to November, remaining at 242,000.

The largest percentage gain for new home sales belonged to the Midwest, which catapulted by 56 percent to 86,000. The region, however, only accounts for only about 10 percent of the U.S. total.

The South, which contributes well over half of total home sales, saw sales jump 15 percent to 456,000.

Overall for the year, each region saw new home sales fall, with losses ranging from 5.4 percent in the Northeast to 10.6 percent in the West.

Sales gains in December came amid a drop in house prices for the month.

The median price of a new home fell by 9.2 percent to $378,000.  (Figure 3). The average price dropped a more modest 4.6 percent to $457,000.

The large difference between the median and average home sales price, nearly $80,000, reflects that home sales were weighted towards higher-priced homes.

In the fourth quarter 31 percent of  all houses sold were priced at $500,000 or more. This is far above the previous year when just 18 percent of new homes sold exceeded $500,000.