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Real Estate

New home sales historically high in 2020

Census Bureau reports 811,000 new homes sold last year

Sales of newly built homes in December occurred at a seasonally-adjusted rate of 842,000 – up 1.6% over the revised November rate of 829,000, according to the Census Bureau’s report on Wednesday. Even with inventory at record-low numbers, that’s still 15.2% higher than the same period last year.

The median sales price of new houses sold in December 2020 was $355,900, up from $335,300 in November. The average sales price was $394,900 in December.

John Pataky, executive vice president at TIAA Bank, said the historically high prices of lumber – pushing overall construction and lot costs up – is partly to blame for the lag in December sales. Indeed, construction continued to play catch-up in December, as new-home inventory rose to a 4.3-month supply.

“While demand is robust, supply is not, and the imbalance will inevitably harm affordability and dissuade buyers from buying,” Pataky said. “Unless we get more existing sellers in the market, I foresee this shortage to continue well into the new year.”

A slow December did not dampen what was a historically successful year for new home sales – the best since 2006, according to Zillow Economist Matthew Speakman. An estimated 811,000 new homes were sold in 2020, 18.8% above the 2019 figure of 683,000.

“Historically low mortgage rates and an ongoing shortage of existing homes for sale stoked demand for new homes in 2020, and it’s likely that the continued spread of COVID-19 also added to the allure of a brand new, never-lived-in home for many buyers,” Speakman said in a statement on Thursday. “The supply of new homes for sale has been picking up lately, but remains low compared to historic norms –– which is likely to incentivize builders to increase their activity, particularly when demand for housing remains solid. Expect the future permit and starts pipeline to be quite full this year. With a banner year in the books, today’s new home sales report set the stage for a solid start to 2021.”

Regionally, the Midwest saw a robust 30.6% increase in new home sales in December, while the West reported a modest 8.8% increase. The Northeast and South both saw declines, with drops of 6.1% and 5.1%, respectively.

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