New-home sales hit a high in 2024 with builders responding to market demands! Learn

[Luis Fajardo]

Wow, what a rollercoaster 2024 was for the housing market. After watching the trends and digging into the numbers, one thing is crystal clear: New-home sales 2025are shaping up to be the silver lining in what’s otherwise been a challenging market. Let’s talk about it, because if you’re like me, you want to know what’s really happening in real estate and what it all means for the future.

Here’s the good news. The U.S. Census Bureau and Department of Housing and Urban Development just dropped their December report, and it’s big. New-home sales hit a seasonally adjusted annual rate of 698,000. That’s a 6.7% jump compared to last year and 3.6% higher than November. Even more exciting, the total new-home sales for 2024 came in at an estimated 683,000. That’s a 2.5% increase over 2023 and the strongest sales volume we’ve seen since 2021. Not too bad, especially in a market that’s been anything but easy.

But let’s be honest—it’s not all smooth sailing. While new-home sales are thriving, the rest of the housing market is struggling to keep up. Existing-home sales, for example, hit their lowest level in nearly 30 years in 2024, with just 4.06 million transactions. That’s a huge gap. So, what’s behind the divide between new and existing homes?

It all comes down to inventory. In many areas, there simply weren't enough existing homes for buyers, which created a big opportunity for homebuilders. And they didn't miss a beat. Builders offered everything from rate buydowns to other buyer incentives to make their homes more attractive. Bright MLS Chief Economist Lisa Sturtevant said it best: these incentives played a huge role in boosting new-home sales. Builders understood the assignment, and they delivered.

The numbers tell the story. As of December, there were 495,000 new homes for sale on a seasonally adjusted basis. That’s a 10% increase compared to last year and a 1.2% bump from November. The months of supply, a key indicator of market health, sat at 8.5 months. While that’s down slightly from its October peak of 9.4 months, it’s still 3.7% higher than last year.

Regionally, the trends get even more interesting. The Midwest and Northeast saw the biggest year-over-year growth in new-home sales, with jumps of 40.3% and 25.9%, respectively. The West and South posted more modest gains of 6.9% and 0.5%. But the South continues to dominate in overall volume, with 423,000 new-home sales on a seasonally adjusted annual basis. The West follows with 154,000, while the Midwest and Northeast trail with 87,000 and 34,000, respectively. These numbers show just how different things can look depending on the region.

Meanwhile, the existing-home market is feeling the strain. Remember last summer when mortgage rates briefly dipped, and it looked like more homeowners might finally list their properties? For a moment, it seemed like the “lock-in effect” might ease up. Then rates climbed again, and inventory took another nosedive. As of now, there are only about 1,150,000 existing homes for sale, far below the 1,390,000 we saw in September.

So, what exactly is this “lock-in effect” everyone keeps talking about? It’s when homeowners who locked in ultra-low mortgage rates during the pandemic hesitate to sell because moving would mean trading up to much higher rates. It’s understandable. Why move and take on a bigger payment when you’re already locked into such a good deal? Zillow Senior Economist Orphe Divounguy nailed it when he said mortgage rates have a massive impact on affordability. When rates fluctuate, it shakes up the market in a big way.

This is where new homes come out on top. Builders can offer those crucial incentives, and the homes themselves often come with modern features and energy-efficient designs that make them even more appealing to buyers.

Looking ahead, it’s clear that new-home sales will remain a bright spot in the housing market. Builders are stepping up to meet demand, and buyers are taking advantage of opportunities in new construction that they simply can’t find in the existing-home market right now. That said, the overall market is still grappling with major challenges, and inventory remains one of the biggest obstacles.

So, what does this mean for you? If you’re a buyer, this could be the perfect time to explore new construction. Builders are offering deals, and there’s more inventory to choose from. If you’re a homeowner thinking about selling, keep an eye on mortgage rates. A more stable rate environment could ease the “lock-in effect” and encourage more existing homes to hit the market.

As we head into 2025, I’ll be watching these trends closely. The housing market is always changing, and staying informed is the key to making smart moves. Whether you’re buying, selling, or just curious about what’s next, there’s never been a better time to keep an eye on real estate. Let’s see where this journey takes us.