U.S. new home sales were much stronger than expected as lower interest rates attracted buyers, according to data released Thursday by the Commerce Department.
New home sales in December increased by 8% to an annual rate of 664,000 from the previous month's revised figure of 615,000. Total sales for the past three months have been revised upward.
Compared to December last year, sales increased by 4.4%.
Sales of new homes increased last year due to a lack of existing homes on the market. Many homeowners decided to stay put rather than sell their homes and sacrifice lower mortgage rates for new higher interest rates. The majority of homeowners have mortgage interest rates below 5%, and more than a fifth have their mortgage rates below 3%. Current homeowners' interest rates on more than 90 percent of their homeowners are less than 6 percent.
The average interest rate for a 30-year fixed mortgage was 6.68% in December, down from 7.44% in November and 7.62% in October. Mortgage rates continued to fall in January and are expected to continue falling this year, potentially spurring more home purchases.
According to the Department of Commerce, full-year sales were up 4.4% from the previous year.
The median sales price for new homes sold in December 2023 was $413,200. The average sales price was $487,300.
New home sales reached a recent peak of more than 1 million units in August 2020, when many Americans were working remotely, shutting down city facilities, rising crime, protesting police violence, and fighting the disease. They were seeking to move out of the city center due to fear and other reasons.
