Why the sale of new house is disappointing, despite beating estimates

By Census: New housing sale: The sale of new single -family homes in December 2024 was a seasonal annual rate of 698,000, according to estimates that were jointly released today by the US Census Bureau and the Department of Housing and Urban Development. This is 3.6 percent (± 19.7 percent)* above the revised November percentage of 674,000 and is 6.7 percent (± 16.2 percent)* above the December 2023 estimate of 654,000.

The graphs below provide an overview of the most important data lines that we have observed today. My first impression is that the turnover does not fall as in 2022, but also experience no significant growth. We maintain a steady level, with the best results that appear when mortgage interest approaches 6%. Under the headline sales figures there are underlying trends that deserve attention. The sale of the past three months was also negatively revised.

For sale inventory and months: The seasonal estimate of new houses for sale at the end of December was 494,000. This represents an offer of 8.5 months at the current sales percentage.

This month the monthly delivery data fell, but the most important thing is that 118,000 completed units are currently available for sale at Bouwers. Moreover, there are currently 268,000 houses under construction. Moreover, there is a record high of 108,000 houses that builders have not yet started building, while the mortgage interest rate remains above 7%.

It is not surprising that the builder’s reliability index, who looks six months ahead, has experienced the biggest fall from month to month in some time. None of this is a good omen for housing permits to grow meaningfully.

If you are wondering why construction work will be in danger in 2025, the offer will accumulate and the mortgage interest rate is still above 7%. Not all builders have considerable profit margins to buy mortgage interest to sell their houses, so it is a cautious business decision for them to stay careful.

Today’s home sales report was disappointing if you are looking for clarity about when we see the home permits grow again. Although the head figures defeat expectations, there were negative revisions and increased inventory. Moreover, the confidence of builders has fallen because the mortgage interest rate has remained more than 7%.

Can things improve? A fall in mortgage interest for 6% would make it much easier for home builders in America. Rates under 6% can lead to increased housing and more permits are issued. In the current area, some are concerned that the rates are going back to 7.50% and higher where the builders struggled last year. That is not my way of thinking, because my prediction of the peak mortgage interest for this year is 7.25%, but you can understand why some builders are torn apart by the rates in 2025.

For now, the Federal Reserve Does not worry too much. However, as illustrated in the graph above, when residential construction workers begin to lose their job, a recession is usually not far behind. This would not be a positive result for the US, while the home permits are still low, this is the current reality with which we are confronted.