US new home sales pick up in December, but down for the year

US new home sales rose in December, but fell overall in 2022, according to figures released on Thursday by the Commerce Department.

Sales of new single-family houses rose 2.3% on the month to a seasonally-adjusted annual rate of 616,000, coming in just below consensus expectations of 617,000. On the year, however, this marked a 26% decline.

The figures showed that the median sales price of new houses sold in December was $442,100, down from $459,000 in November.

For 2022 as a whole, new home sales fell 16.4% on the year to 644,000.

Kieran Clancy, senior US economist at Pantheon Macroeconomics, said the slump in home prices has much further to run.

"New home sales have been broadly flat since August, despite mortgage applications...suggesting that sales should have fallen sharply since then. This disconnect likely is explained largely by a lack of existing homes coming to the market, which is pushing buyers towards the new home market, but it’s not clear how much longer this can last," he said.

"New home supply remains historically high - at 9.0 months of sales in December - but existing home supply is now trending higher too, albeit from a low level. New home sales remain prone to slump suddenly if the upward trend in existing home supply continues; the current level of mortgage demand points to monthly new home sales of around 400K.

"That said, the bigger picture is that most of the plunge in sales in response to lower demand in both the new and existing home markets likely has already occurred. Home prices, however, have been far slower to respond. Our seasonally-adjusted measure of the median new home price is extremely volatile month-to-month, but the trend is softening rapidly; our measure fell at an 8.4% annualized rate in the fourth quarter, starkly below the 19.5% increase in Q3. We estimate that new home prices still need to fall by around 15% before they return to a more sustainable level relative to incomes."