Sales of new U.S. single-family homes increased more than expected in December, further evidence that housing market activity regained some momentum at the end of 2024, though rising mortgage rates remain a constraint.
The report from the Commerce Department also showed the rebound in home sales in November was much stronger than initially estimated. It added to data this month that showed single-family housing starts and building permits increased to a 10-month high in December, while sales of previously owned houses also rose to the highest level since February.
New home sales rose 3.6% to a seasonally adjusted annual rate of 698,000 units last month, the Commerce Department's Census Bureau said. The sales pace for November was revised higher to a rate of 674,000 units from the previously reported 664,000 units.
Economists had forecast new home sales, which account for about 14% of U.S. home sales, would rise to a rate of 675,000 units. New home sales are counted at the signing of a contract, and can be volatile on a month-to-month basis. They increased 6.7% on a year-on-year basis in December.
An estimated 683,000 new homes were sold in 2024, up 2.5% compared to 2023. The median new house price increased 2.1% to $427,000 in December from a year earlier. The pace of increase in home prices is slowing amid rising inventory of new homes.
Residential investment, which includes homebuilding and sales, likely rebounded in the fourth quarter after being a drag on gross domestic product for two straight quarters.
The housing market has been undercut by high mortgage rates, though new home sales have fared better because of still tight inventory of previously owned houses for sale. Mortgage rates increased late last year in tandem with U.S. Treasury yields, which have jumped amid economic resilience, especially in the labor market, and investor worries that President Donald Trump's plans for tax cuts, broad tariffs and mass deportations of undocumented immigrants could stoke inflation.
Builders have been constructing smaller and more affordable homes to woo buyers. The inventory of new homes last month jumped to 494,000 units, the highest level since December 2007, from 488,000 units in November. About 268,000 units of the housing inventory was under construction, slightly down from November, while 118,000 units were completed, the highest level since August 2009.
The remaining 108,000 homes were yet to be built, an all-time high. Higher inventory could make builders reluctant to break ground on new housing projects. At December's sales pace it would take 8.5 months to clear the supply of houses on the market, down from 8.7 months in November.
