December 2021 saw the relative affordability of new homes improve in the U.S., breaking an uninterrupted downtrend that began after April 2020 following the bottom of the coronavirus pandemic recession that month.
That improvement is mainly driven by a significant decline in the median sale price of new homes, which revised data indicates peaked at a record $421,500 in October 2021. Median new home prices then dipped to $416,100 in November 2021 before plunging 9.2% to $377,700 in December 2021 according to the Census Bureau's initial estimate.
The following chart shows how that unexpected drop in new home sale prices affects the trend for raw affordability, which indicates the portion of the median price of a new home would be covered by the annual income of the median American household.
The impact of December 2021's apparent decline in median new home sale prices becomes more visible when we visualize a different measure of relative affordability that takes mortgage rates into account. The next chart features the mortgage payment for a median new home sold as a percentage of median household income in the period from January 2000 through December 2021, where December 2021's percentage shows the sudden improvement in realtive affordability:
If it holds, that's a rather remarkable reset. But that raises a question. How much of the sudden decline for December 2021's median new home sale prices is the result of noise from the Census Bureau's survey of new home sale prices?
U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 26 January 2022.
U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 26 January 2022.
Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 1 February 2022.