Builder incentives and decreasing mortgage rates led to an increase in new home sales in December, but builders remain concerned about another sign of trouble.

In December, the Census Bureau reported that new single-family home sales increased 2.3% to 616,000 on an annualized basis. While up over November’s downwardly revised 602,000 reading, it is 26.6% below December 2021’s estimated 839,000.

Jerry Konter, chairman of the National Association of Home Builders (NAHB), said that from a year ago, new home sales remained down due to decreasing affordability and higher construction costs.

In December, new houses’ median sales price was $442,100, compared to November, that figure is down 3.7% but compared to last year, that is still up 7.8%. The average sale price, on the other hand, was $528,400.

NAHB’s assistant vice president for forecasting and analysis Danushka Nanayakkara-Skillington also added that although the median home price dropped for the second straight month, it is still up 7.8% over last year, which indicates decreasing housing affordability. Another sign that would be of great concern for a soft market is high inventories.

At the end of December, the estimated number of new single-family homes for sale by the Census was 461,000. The number indicates a high inventory representing nine months’ supply.

A year ago, the number of completed and ready-to-occupy homes available for sale was only 33,000 according to NAHB. By December 2022, that number increased 115% to 71,000, indicating a decline in demand and more idle inventory due to a drop in sales. However, still at 15% of the total inventory is ready-to-occupy inventory.