The United States saw a massive number of new home sales last year, government data said Thursday, but the sector is set for a tough few months as Covid-19 keeps shoppers at home.

The Commerce Department estimated that 811,000 new homes were sold last year, 18.8 percent higher than in 2019 and the largest amount since 2006 as low borrowing costs and the business disruptions caused by Covid-19 spurred homebuyers to go shopping.

However, the pace of sales showed signs of decelerating at the end of the year, hitting a seasonally adjusted annual rate of 842,000 in December, slightly worse than expected and just 1.6 percent above November's rate.

Ian Shepherdson of Pantheon Macroeconomics blamed the surge in Covid-19 cases for the year-end weakness, and said it may persist into 2021.

"Covid cases and hospitalizations continued to rise until well into this month, so we expect another relatively lackluster month for new home sales in January," Shepherdson said in an analysis.

"But February and March should be better, and we then expect a sustained re-acceleration in the spring and summer, as Covid recedes for good."

New US home sales boomed in 2020, but tightening supply, rising prices as well as the toll of Covid-19 could chill the sector, at least in early 2021
New US home sales boomed in 2020, but tightening supply, rising prices as well as the toll of Covid-19 could chill the sector, at least in early 2021 AFP / Chris DELMAS

Yearly growth was widespread, with new homes sales seeing the largest jump of nearly a quarter in the Midwest, while the South saw the smallest increase of 17.6 percent.

The demand has been fueled by easy mortgages after the Federal Reserve slashed its main lending rate to zero as the pandemic struck in March, and homebuilders are struggling to keep up.

The supply of new homes by year's end was 4.3 months seasonally adjusted at the current sales pace, a slight recovery from the low of 3.5 months seen in July at the boom's most intense period.

That meant the median sales price of December was $355,900, above the $329,500 seen at the end of 2019.

"Rising home prices, which reached a record high in December, will price some buyers out of the market. Still, we expect unmet demand and low mortgage rates will support a modest increase in the pace of sales this year, by around three to four percent," Nancy Vanden Houten of Oxford Economics said.

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