New-home sales slowed in December as higher mortgage rates discouraged buyers from entering the market.
“The housing market has been hit with a one-two punch of increased competition and higher interest rates,” said Ali Wolf, chief economist at Zonda. “Serious buyers are still showing up, but mortgage rate volatility and uncertainty from 2024 have carried over into 2025.”
Mortgage rates have risen significantly since the Federal Reserve began cutting rates in September, contrary to consumer expectations. Contributing factors include the economy's stronger-than-expected performance, rising debt and deficit levels, and expectations of policy changes under the Trump administration.
Zonda’s New Home Pending Sales Index, which accounts for both overall sales volume and the average monthly sales rate per community, was 136.2 in December. Compared to its all-time high, the index is now 21.8% lower. When adjusted for seasonal factors, new home sales dropped 6.5% month over month.
Prices also saw a decline, particularly for entry-level and move-up homes, driven by select price drops and product changes. Consumers still prefer new homes, but sales are taking longer to close and are costing more. National home prices for high-end homes increased by 0.4% year-over-year, reaching an average of $913,112. In contrast, entry-level home prices fell 1.2% to $329,518 and move-up home prices dropped 0.7% to $518,995.
These declines reflect a mix of price reductions, smaller home sizes, and changing locations. In December, 19% of builders lowered prices, 72% kept prices steady, and 9% raised prices.
National quick move-ins totaled 32,700, up 11.4% compared to last year but 2.3% lower month-over-month. Total QMIs are 51.1% above 2019 levels. QMIs are homes that can likely be occupied within 90 days.
“For many consumers, QMIs provide a great option given the lack of resale supply," Wolf said. “As a result, some builders have pivoted to a more spec-heavy strategy to help capture today’s buyers. In some markets, however, resale inventory is rising and QMIs have become less desirable than earlier this year.”