New home sales rise for third straight month as mortgage rates fall
Mortgage rates continue to decline, boosting sales of new U.S. homes
Mark Tepper makes grim prediction for US housing market in 2023
Strategic Wealth Partners CEO Mark Tepper discusses the weak U.S. housing market and predicts a massive spike in unemployment by the end of 2023.
Sales of new U.S. homes rose for the third straight month in December as high mortgage rates continued to decline, offering some relief for prospective homebuyers.
New single-family home purchases rose 2.3% to a seasonally adjusted annual rate of 616,000 units, the U.S. Department of Commerce reported Thursday. Economists surveyed by Refinitiv expected new home sales — which account for a small percentage of total sales — to hit 617,000 last month.
Just 644,000 new homes were bought in 2022, the smallest annual gain in four years.
"The new home sales market continues to face headwinds from rising costs, affordability challenges and ongoing supply-side headwinds," said Odeta Kush, the deputy chief economist at First American. "Prices will need to continue to adjust down, and builders will likely continue incentives to entice buyers."
US HOUSING MARKET SHOWS EARLY SIGN OF RECOVERY AS DEMAND RISES
For sale sign stands in front of a house on Oct. 6, 2020, in Westwood, Mass. (AP Photo/Steven Senne, File / AP Newsroom)
The interest rate-sensitive housing market has borne the brunt of the Federal Reserve's aggressive campaign to tighten policy and slow the economy.
Policymakers already lifted the benchmark federal funds rate seven consecutive times in 2022 and have indicated they plan to continue raising rates higher this year as they try to crush inflation that is still running abnormally high.
Still, demand has shown early signs of returning as mortgage rates continue to fall from a record high of 7.08% in November.
The average rate for a 30-year fixed mortgage dropped to 6.15% this week, according to data from mortgage lender Freddie Mac. However, that remains significantly higher than just one year ago, when rates hovered around 3.56%.
In this aerial view, completed and under-construction new homes at a site in Trappe, Md., Oct. 28, 2022. (Jim Watson/AFP via Getty Images) / Getty Images)
Mortgage applications are up 28% from early November, according to a separate report from Redfin, which has sent the typical homebuyer's mortgage payment down about 10% – or roughly $180 – since the fall.
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Even with higher interest rates putting homeownership out of reach for millions of Americans, prices are still steeper than just one year ago. The median price of an existing home sold in December was $372,700, a 2% increase from the same time a year ago, according to a report released last week by the National Association of Realtors.
This marks the 130th consecutive month of year-over-year home price increases, the longest-running streak on record.