- New home sales in 2016 were the best in nine years, reflecting a combination of solid demand from homebuyers and new homebuilding that has reached post-recession highs.
- While new home sales continued their steady climb in 2016, there remains room for growth. New home sales represented only about 10.4% of all home sales last year, which is well below the pre-recession average of 16.2%. Given the depths that existing home inventory has fallen, homebuyers could use much more relief from new home construction than what they’ve received thus far into the housing market recovery.
- We expect 2017 to bring both headwinds and tailwinds for new home sales. Homebuyers are facing headwinds from higher mortgage rates and uncertainty about tax policy, low existing inventory, but near full employment, and rising wages are tailwinds that will continue to support new home sales in the year ahead.
New home sales in 2016 reached the highest level since 2007, bringing the annual total to 563,000 and growing 13.5% over 2015. While December capped off the best year in nearly a decade, new home sales as a share of all home sales is quite low. New home sales made up 10.4% of all sales in 2016, up from a low of 7.5% in 2011, but the share is still lower than the pre-recession average of 16.2%. Given the depths that existing home inventory has fallen, homebuyers could use much more relief from new home construction than what they’ve received thus far into the housing market recovery.
New home sales in 2016 were the best in nine years, reflecting a combination of solid demand from inventory-constrained homebuyers and new homebuilding that has reached post-recession highs. But what will 2017 bring for new home sales? We expect the upcoming year to bring both headwinds and tailwinds. While higher mortgage rates blow strongly into the face of homebuyers, low existing inventory, near full employment, and rising wages are strong tailwinds that will continue to push new home sales higher in the year ahead.
