New US Home Sales Up Over 2% In December As Loan Rates Fall

Sales of newly-built homes in the United States rose more than 2% in December, according to US Commerce Department data, which suggested buyers were returning due to easing lending rates although realtors reported dismal overall sales

WASHINGTON (UrduPoint News / Sputnik - 26th January, 2023) Sales of newly-built homes in the United States rose more than 2% in December, according to US Commerce Department data, which suggested buyers were returning due to easing lending rates although realtors reported dismal overall sales.

Single-family homes, the benchmark for the industry, saw a 2.3% increase in new sales to 616,000 units last month, the Commerce Department said in a news release. For November, the Commerce Department originally reported an increase of 640,000 units but revised that down to 602,000 in Thursday's release - even lower than October's final figure of 605,000.

The "revision is not a good one but the overall pace is what was anticipated", economist Adam Button said in a post on the Forex Live forum, referring to the forecast sale of 612,000 units for December. "Home builders have been reporting earnings and have been more upbeat about sales recently, in part due to lower rates and buydowns."

US home mortgage rates have fallen the most since December amid a continuous tumble in inflation from aggressive interest rate hikes imposed by the Federal Reserve, Freddie Mac, the agency overseeing lending for home buyers, said two weeks ago.

The average for a 30-year, fixed loan for a home - the benchmark for mortgages in the United States, had slid to 6.33% from 6.48% a week ago, Freddie Mac had said.

Inflation, as indicated by the Consumer Price Index (CPI) rose by 6.5% in the 12 months to December, the Labor Department said. It was the slowest annual advance for the CPI since October 2021.

The CPI hit a 40-year high in June when it grew at an annual rate of 9.

1%, versus the Fed's inflation target of just 2% per year. In a bid to control surging prices, the central bank added 425 basis points to interest rates since March via seven rate hikes. Prior to that, interest rates peaked at just 25 basis points, as the central bank slashed them to nearly zero after the global COVID-19 outbreak in 2020. The Fed, which executed four back-to-back interest rate hikes of 75 basis points from June through November, imposed a more modest 50-basis point increase in December.

For its next rate decision on February 1, economists expect the central bank to announce an even smaller hike of 25 basis points. The last time the Fed announced a 25 basis-point increase was in March 2022, at the start of its current rate hike cycle.

Notwithstanding the improvement in new home sales, demand for existing houses in the United States remained sluggish for the 11th consecutive month in December, the National Association of Realtors said in a statement on January 20. It was the slowest monthly sales in 12 years as the economy transitions from runaway inflation and aggressive Fed interest rate hikes, the realtors group said.

Housing and real estate play important roles in the US economy, with roughly 65% of occupied housing units being owner-occupied. That makes homes a substantial source of household wealth and home construction a key provider of employment.

In the 2008/09 financial crisis, a crash of the housing market precipitated what later came to be known as the era of the Great Recession. Since then, and up until last year, the property market had been buoyant on the back of steady economic growth and demand from buyers.