New home sales rebounded in December, according to the latest report from the Census Bureau and the Department of Housing and Urban Development.
According to their analysis, new home sales reversed course from November, moving forward 3.7% in December. In fact, sales of new single-family houses increased to 621,000.
Although this is up from November’s revised rate of 599,000, December’s sales still fell 2.4% below the previous year’s level.
“New home sales rose slightly in December 2018, but were lower than the year ago pace, much like other housing indicators that performed poorly at the end of 2018 - pending home sales, housing starts, as well as buyer and builder confidence,” Realtor.com Chief Economist Danielle Hale said. “Additional housing inventory is also evidence of a cooler start to the 2019 housing market.”
Hale pointed out that mortgage rates have drifted much lower and now sit just below year-ago levels.
“Some housing indicators, such as mortgage applications and pending home sales, are starting to show signs of life, suggesting that some thawing could be ahead as we approach the spring buying season," she said.
The median sales price of new homes sold was $318,600 and the average sales price was $377,000.
The seasonally adjusted estimate of new homes for sale by the end of the month was 344,000 in December, representing a supply of 6.6 months at the current sales rate.
Zillow Economic Analyst Matt Speakman said today’s new home sales data likely reflects November's pending transactions, which began when interest rates were near their recent highs and builders were aggressively cutting prices in response.
“The strategy largely appears to have worked, with sales volumes coming in better than expected — at least on the surface. Prior months’ activity was revised sharply downward, and sales ended 2018 below where they ended 2017,” Speakman continued. “New homes selling in December were likely permitted for construction in the spring or early summer, when the 2019 economic outlook was worse than now.”
However, Speakman indicates that more favorable conditions may be on the horizon.
“Building permits increased in December, and buyers appear responsive to conditions that are more favorable now than they were just a few months ago, when rates were climbing and the government shutdown loomed large,” Speakman said. “And price cuts are still relatively frequent, particularly in larger markets, which may goose sales volumes as prices fall within the budget of more buyers. It’s been a disappointing fall and winter, but the sun is coming back soon.”