Housing Market Sees Strong Finish to 2024
The US housing market ended 2024 on a high note, with new single-family home sales exceeding expectations in December. This surge in sales indicates a rebound in housing market activity, despite the ongoing constraint of rising mortgage rates.
New Home Sales Defy Expectations
According to the Commerce Department, new home sales rose 3.6% to a seasonally adjusted annual rate of 698,000 units in December, surpassing economists’ forecasts of 675,000 units. This marks a significant increase from November’s revised rate of 674,000 units.
A Solid Year for New Home Demand
Thomas Ryan, North America economist at Capital Economics, notes that “new home sales in December wrap up a solid year for newbuild demand in an otherwise stagnant housing market.” Ryan predicts that new home sales will continue to grow this year.
Year-Over-Year Gains
New home sales increased 6.7% on a year-over-year basis in December, with an estimated 683,000 new homes sold in 2024, up 2.5% compared to 2023. The median new house price also rose 2.1% to $427,000 in December from a year earlier.
Mortgage Rates Remain a Challenge
While new home sales have fared better than expected, the housing market still faces headwinds from high mortgage rates. The average rate on a 30-year fixed-rate mortgage remains just below 7%, making it difficult for some buyers to enter the market.
Regional Variations
New home sales saw significant gains in the Northeast and West, with increases of 41.7% and 20.3%, respectively. However, sales dropped 2.1% in the South and 3.3% in the Midwest.
Inventory and Affordability
The inventory of new homes jumped to 494,000 units, the highest level since December 2007. Builders have been constructing smaller and more affordable homes to attract buyers, with about 54% of the housing inventory under construction and 24% completed.
Economic Implications
The housing market’s rebound is expected to contribute to a strong GDP growth estimate for the fourth quarter, with economists predicting a 2.7% annualized rate. The economy’s expansion is well above the 1.8% rate considered non-inflationary by Fed officials.
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