December 23, 2024

New home sales rebounded by 5.9% in November to 664 thousand after having plunged by 14.8% in October  However, the October drop was almost exclusively in the South and clearly the result of the combo of Hurricanes Milton and Helene.  Sales in the South and overall will continue to climb in the months ahead.  New home sales can be volatile from month to month, but it seems clear that they are in a gradual uptrend.

After having peaked at 7.6% mortgage rates have fallen to 6.8%.  As inflation subsides further in 2025 and the Fed continues to reduce rates slightly, mortgage rates should decline to 5.9% or so by the end of next year.

Home prices fell 5.4% in  nOvember to $402,600 after having risen 1.8% in October.  They tend to be rather bouncy from from to month but over the past year new home prices have declined 6.3%.

Housing affordability currently stands at 102.3 which means that median-income earning consumers had 2.3% more income than required to purchase a median-priced home.  If mortgage rates continue to decline in 2025 as inflation subsides, home prices rise slowly, and income continues to climb, affordability should rise as the year progresses, and that median income earning family should have about 15% more income than required by the end of next year.  This should provide some stimulus for both new and existing home sales.

As a result, we look for new home sales to rise from 664 thousand currently to 780 thousand or so by the end  of 2025.

Stephen Slifer

NumberNomics

Charleston, SC