New home sales rise for third straight month as mortgage rates fall

Sales of new single-family homes in the US rose for the third straight month in December as mortgage rates continued to fall, giving hope that the struggling housing market is starting to stabilize.

New home sales rose 2.3% to a seasonally adjusted 616,000 units last month, the Commerce Department said Thursday. The November sales pace was reduced 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, to fall to 617,000 units. In December, sales fell 26.6% year on year. In 2022, they decreased by 16.4%.

The fastest cycle of Federal Reserve interest rate hikes since the 1980s has led to a recession in the housing market. However, falling mortgage rates raised hopes that the housing market could soon stabilize, albeit at a subdued level.

The 30-year fixed mortgage rate fell 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 is down from an average of 7.08% at the start of the fourth quarter, which was the highest since 2002. But it remains well above the average of 3.56% for the same period last year.

The median price of a new home in December was $442,100, up 7.8% from a year ago. At the end of last month, there were 461,000 new homes on the market, unchanged from November. Houses under construction make up 63.1% of the inventory, while houses not yet built make up 21.5%.

Completed homes accounted for 15.4% of the inventory, well below the long-term average of 27%. At December’s sales pace, it will take 9.0 months to liquidate the supply of homes on the market, compared to 9.2 months in November.