Easing mortgage rates reinvigorates the new home sales market
The sales of newly built, single-family homes surged at the end of 2023, thanks to dipping interest rates that coaxed hesitant buyers back into action.
New home sales jumped 8% in December, reaching a seasonally adjusted annual rate of 664,000, marking a 4.4% increase from the year before, according to the latest data from the Census Bureau. This rise contributed to 668,000 new home sales in 2023, a 4.2% boost from 2022's figures.
Charles Williams, CEO of mortgage tech company Percy, observed the positive momentum in the market, noting, "There are several nuggets of positivity in the market currently. Fundamentals are generally improving across the board, and we expect homebuying activity to continue to pick up through the year as 30-year mortgage rates will likely close out in 2024 at around 6%.
"Home prices are likely stabilizing as well, so smart homebuyers will get in on the market ASAP, as the average monthly mortgage payment is not going to get that much cheaper in the months ahead."
Alicia Huey, chairman of the National Association of Home Builders, pointed out the role of scarce existing home inventory and falling interest rates in spurring December's sales. “The rise in sales also coincides with our latest builder surveys, which show a marked increase in future sales expectations because of falling mortgage rates," Huey said.
The inventory of new homes in December nudged up slightly to 453,000, hinting at an 8.2-month supply at the current pace. Meanwhile, the median new home price dropped to $413,200 in December, down 3% from the previous month and 13.8% from a year ago.
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“Homebuilders charged less for houses in 2023 than in 2022 — and ended up selling more houses,” NerdWallet mortgage expert Holden Lewis commented. “It's remarkable that the median price of a new home was $30,400 lower in 2023 than the year before, even as inflation was on everyone's mind. The lower prices are builders' response to high mortgage rates. There's still a severe housing shortage in this country, so let's hope builders keep selling houses at prices that middle-class consumers can afford.”
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