New Home Sales Fall Below Expectations
Despite economists’ earlier predictions of a rebound to a rate of 685,000 units, the unexpected decline in new home sales, which account for approximately 13.4% of total U.S. home sales, raises concerns about the health of the housing market. It is important to note that new home sales are an indicator of market trends as they are counted at the signing of a contract. The decline was particularly pronounced in the densely populated Southern and Western regions.
Persistent Shortage of Previously Owned Homes
The chronic shortage of previously owned homes continues to impact the housing market. According to the National Association of Realtors, the supply of previously owned houses on the market remains significantly below pre-pandemic levels, with less than 2 million units available. However, there was a modest rise in home resales in November as reported by the association.
Mortgage Rates Dip, Stimulating Home Sales Outlook
Mortgage rates have seen a recent decline, which may help bolster home sales in the coming year. Data from mortgage finance agency Freddie Mac reveals that the average rate on a 30-year fixed-rate mortgage fell to 6.67% this week, the lowest level since June. This is a significant drop from the previous week’s 6.95% rate. Lower mortgage rates often encourage prospective homebuyers to enter the market, driving demand and ultimately stimulating sales activity.
Median New House Price Declines, But Strong Gains Still Evident
In November, the median price of new houses was $434,700, registering a 6.0% decline from the previous year. Builders have been strategically lowering prices to attract buyers. However, it is worth noting that other measures indicate strong price gains. The bulk of the houses sold last month fell within the price range of $300,000 to $749,000.
Market Outlook: Clearing the Supply of Houses
At November’s sales pace, it would take approximately 9.2 months to clear the supply of houses on the market, compared to 7.9 months in October. This increase in the supply of homes highlights the need for sustained demand to maintain a healthy balance in the housing market.