New home sales fell slightly at the end of 2020 due to higher prices offsetting the strong demand from buyers that was seen throughout the year, according to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
Although sales of new homes grew 1.6% in December, we saw much stronger sales growth in the preceding months, the National Association of Home Builders said in a blog post.
Throughout 2020, new home sales rose by 18.8% compared to the year before.
“While the market remains solid, median home prices are increasing due to higher building material costs, most notably softwood lumber, and a shift to larger homes,” said Robert Dietz, chief economist of the NAHB.
The NAHB reported that the median sales price of a new home in December was $355,900, compared to a median sales price of $329,500 in the same month one year ago.
Moreover, NAHB Chairman Chuck Fowke said that the affordability of new homes could be negatively impacted by increased regulatory burdens in 2021, as well as more increases in the cost of building materials.
In any case, reduced sales will at least have a positive impact on the available inventory of new homes, which currently stands at just 4.3 months supply at the current sales pace, down 19% from where it was a year ago.
Across the country, new-home sales saw the largest gains for all of 2020 in the Midwest, up 24.2%, followed by a 21.2% gain in the Northeast, an 18.9% increase in the West, and a 17.6% increase in the South.