US new home sales post third straight monthly gain

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 stabilise.

New home sales increased 2.3 per cent to a seasonally adjusted annual rate of 616,000 units last month, the Commerce Department said on Thursday (Jan 26). 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 US home sales, falling to a rate of 617,000 units. Sales dropped 26.6 per cent year on year in December. They decreased 16.4 per cent 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 stabilise, though at depressed levels.

The 30-year fixed mortgage rate declined to an average 6.15 per cent last week, the lowest level since mid-September, according to data from mortgage finance agency Freddie Mac.

The rate was down from 6.33 per cent in the prior week and has dropped from an average of 7.08 per cent early in the fourth quarter, which was the highest since 2002. But it remains well above the 3.56 per cent average during the same period last year.

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The median new house price in December was US$442,100, a 7.8 per cent 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 per cent of the inventory, with homes yet to be built making up 21.5 per cent.

Completed houses accounted for 15.4 per cent of the inventory, well below a long-term average of 27 per cent. 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. REUTERS