In a pleasant surprise, new-home sales in the United States exceeded expectations for December, propelled by a decline in mortgage rates that attracted eager homebuyers. According to government data released on Thursday, purchases of new single-family homes surged by 8%, reaching an annual pace of 664,000, following an upward revision to November’s figures. This outperformed the median forecast of 649,000 in a Bloomberg survey of economists.
These figures indicate a positive momentum heading into 2024, highlighted by the first annual increase in sales in three years. The drop in mortgage rates by more than a full percentage point towards the end of the previous year is seen as a contributing factor, and with the potential for further interest rate cuts by the Federal Reserve, the housing sector could receive an additional boost.
The median sales price of new homes experienced a fourth consecutive monthly decline, reaching $413,200 in December compared to the same period a year ago. This drop is attributed to an increase in the availability of homes for sale, with the supply of new homes reaching 453,000 in December, the highest level in over a year, according to the report from the Census Bureau and the Department of Housing and Urban Development.
Unlike the resale market, where existing homeowners are hesitant to list their properties, builders have shown more optimism, with increased permit applications due to the easing of borrowing costs. Nearly two-thirds of homebuilders indicated they offered some form of incentive in January to drive buyer interest, according to data from the National Association of Home Builders and Wells Fargo.
Regional Breakdown:
- In the Midwest, new home sales reached the highest level since July.
- In the South, the largest region in the country, purchases rebounded after a decline in November.
New-home sales are considered a more timely gauge compared to purchases of previously-owned homes, which are calculated when contracts close. The latter fell by 1% in December from the previous month, concluding the worst year for sales in almost three decades.
It’s important to note that the data can be volatile, with the report indicating a 90% confidence level that the change in sales ranged from a 16.2% decline to a 32.2% gain.
In a separate report on Thursday, fourth-quarter growth in the US economy exceeded forecasts, capping a remarkably robust year that defied predictions of a recession.
