Key Points
- New home sales in the U.S. rose 3.6% in December to an annual rate of 698,000 units.
- Sales surged in the Northeast and West but declined in the South and Midwest.
- Elevated mortgage rates near 7% continue to pressure the housing market.
- To attract buyers, developers are focusing on smaller, more affordable homes.
Sales of new single-family homes in the U.S. increased more than expected in December, signaling renewed momentum in the housing market despite challenges posed by high mortgage rates. According to the Commerce Department, new home sales rose 3.6% to a seasonally adjusted annual rate of 698,000 units, surpassing economists’ forecasts of 675,000 units. The revised sales figures for November also showed a higher-than-expected 674,000 units, up from the previously reported 664,000.
Despite these positive signs, the housing market remains constrained by elevated mortgage rates. The average 30-year fixed-rate mortgage hovers below 7%, following aggressive Federal Reserve interest rate hikes over the past two years. The Fed is expected to keep its policy rate unchanged in the upcoming meeting, having already reduced it by 100 basis points since September.
Regional sales trends were mixed in December. New home sales soared by 41.7% in the Northeast and 20.3% in the West. However, sales declined in other regions, with a 2.1% drop in the South and a 3.3% decrease in the Midwest.
Builders have responded to the market challenges by focusing on smaller, more affordable homes to attract buyers. The inventory of new homes increased to 494,000 units, the highest since 2007, with 118,000 units completed—the highest level since 2009. Experts warn that higher inventory levels could slow future construction.
While new home sales benefit from the limited availability of previously owned homes, concerns over rising mortgage rates and economic uncertainty persist.