New-home sales increased 8.8 percent year-over-year in the fourth quarter, the biggest gain in more than two years and the third consecutive quarterly increase, according to a report by Redfin.
At the same time, new-home supply declined 11.1 percent year-over-year, the biggest inventory drop since at least 2012 and the third straight quarterly decline.
“The market has seen a mismatch between where new construction of homes are needed the most and where new homes are being built, and that’s because builders are focused on areas where they can cheaply acquire and develop land,” Redfin Chief Economist Daryl Fairweather said in a release. “For example, expensive cities like San Francisco have seen a decline in building permits, while construction is booming in places like Raleigh, N.C. and El Paso, Texas, which are already quite affordable.
“The only way to solve this mismatch between where people need homes and where homes are being built is for people to move to where the homes are, and that’s already happening,” Fairweather said. “Looking ahead, permits have increased thanks to low interest rates, so even though inventory is down, there’s hope for the future given that permits are up so significantly.”
During the quarter, national sale prices of new homes slipped 0.3 percent year-over-year to a median of $369,900, which the report said is smallest drop out of the past three consecutive quarterly declines. Existing-home prices rose 6 percent, sales increased 5.8 percent (the largest gain in three years) and inventory slipped 14.2 percent (the biggest slide since 2013) during the fourth quarter.
The report said Little Rock, Ark., had a more than 200 percent increase in building permits in the fourth quarter.
“New home construction in West Little Rock and surrounding cities has been surging. The area has a lot of rural space, so there’s plenty of room for expansion,” Redfin Team Manager Bonnie Nixon said. “Plus, it’s affordable to build here compared to other parts of the country. One trend we’re seeing is developers demolishing older homes and rebuilding more modern ones.”