December saw an increase in new home sales, providing a positive outlook for the market
New Home Sales Rise, Existing Home Sales Fall
New home sales saw a significant increase of 8% from November to December, reaching a seasonally adjusted annual rate of 664,000, according to a report from the Census Bureau. This surge in sales can be attributed to the limited supply of previously owned homes, which is driving buyers towards newly built units.
In December, the median sales price for a new home was $413,200, marking a 4.4% increase compared to December 2022.
Existing Home Sales Decline
On the other hand, existing home sales experienced a decline, as reported by the National Association of Realtors. Families’ home purchasing power was negatively impacted by high mortgage rates, causing a decrease in sales. Mortgage rates recently reached their highest point in 23 years, crossing the 8% threshold before slightly decreasing.
As of Thursday, the average rate on a 30-year fixed-rate mortgage stood at 6.95%, according to Mortgage News Daily.
Over the past year, the housing market has witnessed an unusual dynamic between new and existing home sales. Many homeowners who secured low mortgage rates during the pandemic are now hesitant to sell due to the higher rates, resulting in a decrease in existing home inventory. This, in turn, has led to an increase in demand for new homes.
In December, existing home sales reached their lowest level in over a decade, with a seasonally adjusted annual rate of 3.78 million. This represents a 1% decrease from the previous month and a 6.2% decline compared to the previous year.
Positive News for the Housing Market
Despite the decline in existing home sales, there was a slight improvement in the housing market. Housing starts, which measure the number of new residential buildings that began construction, increased by 1.9% from November to the following month, according to the Census Bureau. Compared to December 2022, housing starts rose by 6.1%.
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What are some factors contributing to the increase in new home sales in December?
,000 units, according to the latest data released by the National Association of Realtors (NAR). On the other hand, existing home sales experienced a decline during the same period.
The rise in new home sales can be attributed to multiple factors. One of the main factors is the continuous demand for housing, particularly due to the low-interest rates and a strong job market. These two factors have made it easier for prospective buyers to enter the housing market. Additionally, the pandemic has led to a shift in preferences, with more people looking for larger homes to accommodate remote work and virtual schooling needs.
Another important aspect contributing to the increased new home sales is the limited inventory of existing homes. The number of existing homes available for sale has been steadily declining, creating a favorable environment for new home sales. With fewer options in the existing home market, prospective buyers have turned their attention to new homes that better meet their needs and desires.
Furthermore, the construction industry has been experiencing a surge in activity. Homebuilders have been working diligently to meet the rising demand for new homes, leading to an increase in housing construction projects across the country. This has resulted in an ample supply of newly constructed homes available for purchase, enabling buyers to find suitable options more easily.
While new home sales have been on an upward trajectory, existing home sales have experienced a setback. Existing home sales declined by 3.6% in December, reaching a seasonally adjusted annual rate of 6.76 million units. This decline can be attributed to a variety of factors, including the limited inventory mentioned earlier. Additionally, rising home prices have made it challenging for some potential buyers to afford existing homes in certain markets.
Furthermore, the decline in existing home sales may be partially due to the traditional winter slowdown in the real estate market. This time of year often sees reduced activity as many potential buyers and sellers choose to postpone their transactions until the spring season, when the weather is more favorable and the market tends to become more active.
Despite the decline in existing home sales, experts remain optimistic about the overall state of the housing market. The steady rise in new home sales indicates sustained demand and a strong foundation for the construction industry. Additionally, the low-interest rates are expected to continue supporting the market and attracting buyers.
In conclusion, new home sales experienced a significant increase in December, reaching a seasonally adjusted annual rate of 664,000 units. This rise can be attributed to factors such as low-interest rates, a strong job market, and a limited inventory of existing homes. However, existing home sales witnessed a decline during the same period, likely due to the limited inventory and the traditional slowdown during the winter season. Despite this setback, experts believe that the housing market will continue to thrive, supported by ongoing demand and favorable market conditions.
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