The U.S. housing market experienced a notable shift at the end of 2024, with new-home sales rising despite persistently high mortgage rates and affordability concerns. The most significant development, however, was the decline in median new-home prices, marking a potential turning point after years of soaring costs under the Biden administration.
In December, new single-family home sales reached an annualized rate of 698,000, according to the Commerce Department. This exceeded Wall Street’s forecast of 671,000 and represented a 2.5 percent increase year-over-year. The uptick in new-home sales stands in contrast to the broader housing market, where existing-home sales fell to their lowest levels since 1995 due to limited inventory and high prices.
The median price for newly built homes dropped to $420,100 in December, the lowest level in three years, down from $428,600 in 2023. Builders, faced with high borrowing costs and a slowing market, shifted their focus to more affordable homes. Nearly 30 percent of new homes sold in 2024 were priced between $300,000 and $399,999, a sharp contrast to the luxury-focused offerings of previous years.
This pricing adjustment provides a glimmer of hope for prospective homebuyers burdened by years of inflated housing costs. While existing-home prices continued to set records, the narrowing price gap between new and resale homes makes new builds a more competitive option. A decade ago, new homes commanded a significant premium over resale properties; today, they are increasingly within reach for first-time buyers and budget-conscious families.
The decline in new-home prices reflects a broader correction after years of housing “Bidenflation,” during which runaway prices made homeownership unattainable for millions. Builders, lured by higher profit margins, had prioritized luxury homes, further exacerbating affordability challenges.
As builders adjust to a more constrained market, their focus on affordable housing signals a shift that could bring lasting relief. Lower prices and a more balanced inventory align with a housing market beginning to recover from years of economic strain.