Sales of newly built homes in the U.S. surged by much more than expected as buyers were drawn in by falling interest rates, data from the Commerce Department indicated Thursday.
New home sales rose 8 percent to an annual rate of 664,000 in December from a revised 615,000 in the prior month. Sales over the previous three months were, in aggregate, revised higher.
Compared with the prior December, sales were up 4.4 percent.
Sales of new homes were boosted last year by a lack of supply of existing homes on the market. Many homeowners have decided to stay put rather than sell their homes and sacrifice low interest mortgages for the new higher rate. The majority of homeowners have mortgage rates below five percent and more than one-fifth have a rate below three percent. More than 90 percent of current homeowners have rates below six percent.
The average 30-year year fixed mortgage rate fell to 6.68 percent in December, down from 7.44 percent in November and 7.62 percent in October. Mortgage rates have continued to fall in January and are expected to keep falling this year, which could spur even more home buying.
Sales for the full year were 4.4 percent above the prior year, the Commerce Department said.
The median sales price of new houses sold in December 2023 was $413,200. The average sales price was $487,300.
New home sales hit their recent peak of over 1 million in August 2020, when many Americans sought to move out of city centers due to remote working, the lockdown of urban amenities, rising crime, anti-police riots, and fear of disease.
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