New Home Sales Rose Over 4% In 2023 (Prices Tumbled), As Existing Sales Hit Record Low

On the heels of the worst year ever for existing home sales, new home sales were expected to rebound 10.0% MoM in December after plunging back to reality in November (-12.2%) as mortgage rates tumbled.

New home sales disappointed in December, rising just 8% MoM (vs 10% exp) but that is still the biggest MoM jump since last December.

Source: Bloomberg

Of course, having pointed out the dramatic series of downward revisions to this data series this year, November’s 12.2% plunge was revised up to a 8.0% drop

Source: Bloomberg

On a SAAR basis, new home sales ended at 664k (pre-COVID-lockdown levels), completely decoupled from existing home sales…

Source: Bloomberg

This left new home sales up 4.4% YoY…

Source: Bloomberg

The median new home price fell 13.8% YoY to $413,200

Source: Bloomberg

Trouble is, even as mortgage rates have plunged recently, applications for home purchases have only rebounded modestly…

Source: Bloomberg

And while mortgage rates have declined (rapidly), they remain massively high relative to the effective mortgage rate for all Americans. That difference is the ‘subsidy‘ that homebuilders have to fill to enable buyers – and it’s still yuuuge!

Source: Bloomberg

Of course, investors don’t care about actual fundamentals, rates are down so ‘buy buy buy’ the builders…

Source: Bloomberg

Finally, we note that supply shrank from 8.8 months to 8.2 months in December – so don’t expect new home prices to keep falling (they’ll be rising like the supply-constrained existing homes market)…

…and don’t expect The Fed cuts to prompt an excess-supply-driven decline in prices – it’s start your engines time on the next bubble.