The numbers: Sales of newly built homes in the U.S. jumped in December as falling mortgage rates sparked home-buying interest.
U.S. new-home sales rose 8% to an annual rate of 664,000 in December from a revised 615,000 in the prior month, the Commerce Department reported Thursday.
The number is seasonally adjusted and refers to how many homes would be built over an entire year if builders continued at the same pace every month.
The pace exceeded expectations on Wall Street. Economists had forecast new-home sales to total 649,000 in December.
Mortgage rates dipped below 7% in early December 2023, according to data from Freddie Mac, which could be one reason for increased demand for homes.
New-home sales are still far below a recent peak of over 1 million in August 2020.
The increase in new-home sales in December was the largest in a year. New-home sales are still far below a recent peak of over 1 million in August 2020.
The rate of new-home sales was boosted by a sharp increase in the Northeast.
Key details: The median sales price of a new home sold in December fell to $413,200 from $426,000 in the prior month.
The supply of new homes for sale fell 6.8% between November and December.
Most of the U.S. reported an increase in sales of newly built homes, with the Northeast notching a 32% increase in December, followed by more modest increases of around 10% in the Midwest and the South. Only the West saw a drop in new-home sales.
Overall, sales of new homes are up 4.4% compared with last year.
Big picture: New-home sales continue to be a bright spot in the housing sector, and as mortgage rates fall, demand could be further boosted. The housing market continues to rely on newly built homes amid a persistent lack of resale home listings.
What are they saying? New-home sales will continue to rise in 2024, Thomas Ryan, property economist at Capital Economics, wrote in a note, as the lock-in effect of current homeowners’ low mortgage rates won’t fade fast enough, “keeping the supply of secondhand homes on the market historically low.”
He added: “Therefore, we’re forecasting new-home sales to reach 781,000 annualized by end-2024, their highest level since the second spike in the demand for new homes at the beginning of 2022.”
Rob Bowman, president of Charter Homes & Neighborhoods, a Pennsylvania-based home builder, said that “there’s still a tremendous need for housing in the U.S. We’re seeing demand across the board,” he told MarketWatch.
Market reaction: Stocks
DJIA
SPX
were up in early trading on Thursday. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was over 4.1%.
Shares of builders
XHB,
including D.R. Horton Inc.
DHI,
Lennar Corp.
LEN,
PulteGroup Inc.
PHM,
and Toll Brothers Inc.
TOL,
were up in the morning trading session.
Read the full article here
