New-home sales jumped in December

Sales of new U.S. homes unexpectedly rose in December after a downwardly revised November reading, as lower mortgage rates and more-affordable properties offered some relief for buyers.

Single-family home sales increased from the prior month to a 621,000 annualized pace, according to a government report Tuesday that was delayed more than a month by the partial government shutdown. While that’s above the median analyst estimate, the November figure was revised down by 58,000, and October’s reading was also lower than previously reported.

Key insights

Sales probably got a lift from improved affordability, with the median sales price down 7.2 percent from a year earlier. The number of homes for sale where construction hadn’t started rose to the highest since 2007, indicating more supply that could hold down prices or push them even lower. In addition, the housing market is likely getting support from a decline in mortgage rates, as well as a strong job market. Also, wage gains are outpacing home-price increases by some measures for the first time in several years. The latest reading is still below the pace in early 2018, and residential investment has been a drag on economic growth for four straight quarters. Previous data showed housing starts dropped to a two-year low in December while existing home sales -- which account for the bulk of the market -- fell in January to the slowest pace since 2015. The number of properties sold for which construction hadn’t yet started rose to 213,000, the highest since 2017, indicating a steady pipeline of building work.

What economists say

“Downward revisions to new home sales in October and November suggest BEA’s assumptions for fourth-quarter residential investment were slightly more optimistic than the actual pace of sales, implying modest downward revisions to the final GDP print for the quarter,” Bloomberg economists Yelena Shulyatyeva and Carl Riccadonna said. “Recent declines in new home prices amid stable interest rates and growing wages will likely bolster housing demand this year.”

MPA

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