Sales of newly built houses have rebounded even as prices rise, a signal that elevated mortgage rates aren't deterring homebuyers.
December new home sales totaled a seasonally adjusted annual rate of 698,000, meaning that many homes would change hands over the next 12 months at this pace. The rate is 3.6% higher than the revised November figure and 6.7% above the same month of 2023, according to a report released Monday by the U.S. Census Bureau and the Department of Housing and Urban Development.
Meanwhile, the median sales price of new houses sold last month was $427,000, compared with $402,500 in November and $418,300 in December 2023.
"Sales may have been propped up by unseasonably warm weather in December but we think the pace of sales may also indicate that homebuyers are proving to be more resilient than expected to mortgage rates around 7%," said Nancy Vanden Houten, lead U.S. economist for research firm Oxford Economics, in a statement.
That sentiment is more optimistic than a forecast earlier this month from Oxford. At the time, the firm suggested higher mortgage rates could hurt home construction volume. The 30-year, fixed-rate mortgage average topped 7% earlier in January before falling back to 6.96% on Thursday, according to Freddie Mac.
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The California wildfires and bitter cold affecting much of the country, including the South, could hurt January sales, but Vanden Houten said she is encouraged about the longer term.
"Looking past January, we expect new home sales to improve modestly in 2025, based on our forecast for mortgage rates to decline modestly over the course of the year," she said. "In addition to lower rates, new home sales should also be supported by incentives offered by builders, a healthy amount of supply, a strong economy and healthy labor market."
Sales of new houses ended the year up 2.5% over the 2023 total, according to the National Association of Home Builders. The trade group is also predicting an uptick in sales this year.
“New home sales ended 2024 higher on ongoing limited resale inventory conditions,” NAHB Chairman Carl Harris said in a statement. “Builders are cautiously optimistic about the building market for 2025 given a post-election policy reset that seeks to eliminate unnecessary regulations.”
The NAHB defines a new home sale as when a buyer signs a contract or a builder accepts a deposit. The home can be in any stage of construction, from not started to complete.