Sales of new US single-family homes increased for a third straight month in December as mortgage rates continued to decline, offering hope that the struggling housing market was starting to stabilize.
New home sales increased 2.3% to a seasonally adjusted annual rate of 616,000 units last month, the Commerce Department said on Thursday. November’s sales pace was revised lower to 602,000 units from the previously reported 640,000.
Sales rose in the Midwest and South, which are generally considered affordable regions. They fell in the Northeast and West. Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, falling to a rate of 617,000 units. Sales dropped 26.6% year on year in December. They decreased 16.4% in 2022.
The Federal Reserve’s fastest interest rate-hiking cycle since the 1980s has driven housing into recession. Falling mortgage rates have, however, raised hope that the housing market could soon stabilize, though at depressed levels.
The 30-year fixed mortgage rate declined to an average of 6.13% from 6.15% last week, the lowest level since mid-September, according to data from mortgage finance agency Freddie Mac.
The rate has dropped from an average of 7.08% early in the fourth quarter, which was the highest since 2002. But it remains well above the 3.56% average during the same period last year.
The median new house price in December was $442,100, a 7.8% increase from a year ago. There were 461,000 new homes on the market at the end of last month, unchanged from November. Houses under construction accounted for 63.1% of the inventory, with homes yet to be built making up 21.5%.
Completed houses accounted for 15.4% of the inventory, well below a long-term average of 27%. At December’s sales pace it would take 9.0 months to clear the supply of houses on the market, down from 9.2 months in November.