Newly constructed homes are selling at the highest rates since the pandemic, but affordability remains a problem.
In December homebuyers purchased new homes at an annual rate of 745,000, the Census Bureau reported on Friday. This was a small drop from November’s sales, but was still almost 100,000 above October’s rate. But prices also rose nearly $17,000 between November and
December, leaving the median sales price for new homes at $414,400.
The data is the latest evidence that after a long slump, new home sales may finally be starting to pick up. Falling inflation rates and an improving job market may be contributing to Americans’ willingness to spend on homes. But with 30-year fixed mortgage rates still hovering just over six percent and little signs of them going down significantly, this investment stays out of reach for many Americans. As a result, sales of new homes remain far lower than the number of Americans who want to buy them.
New home sales “should be roughly 20% higher based on underlying demographic demand,” said Stan Shipley, Managing Director of Economics at Evercore ISI. Sales were higher than expected, he added, “but it wasn’t a great report.”
Even these cautious signs of progress in new home sales might not last for long. The new home sales report was delayed because of the government shutdown, but data on sales of existing home showed that January’s home sales tanked 8.4% compared to the previous month. It’s possible that new home sales will follow a similar pattern when January sales are released. New home sales have also seen significant revisions — October’s number was revised down by nealy 100,000 post-revision.
While the current housing market isn’t very appealing to buyers, it’s also not a great time for builders. In addition to construction materials becoming more expensive due in part to tariffs, builders are being forced to slash their prices in order to entice buyers. One in five homebuilders started offering discounts on new properties by the end of 2025, according to data from realtor.com.
“Homebuilders are trying to give incentives, potentially to help with down payments or to make it more attractive to buy a home in this high-rate environment,” said Eli Nir, a U.S. macro strategist for TD Securities. “But that’s more of just trying to offset the huge affordability issue going on. We don’t really see that as something that could help spark like a re-acceleration in demand.”
There are some areas of the county still experiencing high demand with far too little housing. In Syracuse, New York, for example, a semi-conductor chip plant now being built is expected to bring up to 50,000 new jobs to the region, increasing the demand for housing dramatically. According to Mansion Global, in the last three years real estate prices in the city’s metro area have increased 42%. Due to problems like outdated zoning laws and supply chain issues, even an increase in new construction doesn’t ensure that the areas that need it most will receive it.
“You need government programs to get their hands on the land and find home builders that will then build the homes here. You need an activist strategy. You just can’t leave it to the markets right now,” said Shipley.
There might be some hope for this sort of initiative. The House and Senate are working to pass incentives for builders and local communities to make it easier to build new housing, and while they’re not in place yet, the measure passed in The House of Representatives last week, and The Senate will take up a related bill, “The Road to Housing Act,” in the coming weeks.
But until housing supply increases enough to stabilize real estate prices, it’s really just a waiting game. Currently, the most likely solution to the housing market’s sluggishness short of government stimulation is home buyers who are sick of waiting to make their purchase.
“We could see mortgage rates get a bit lower, which could spur some demand,” said Nir. He suggests it’s possible that we could get “to a point where homebuyers begin to capitulate and just say, ‘ok, rates are never going to really come down to the low levels we saw during COVID.”
