Purchases of new homes in the U.S. surged in December to the highest level in 10 months, closing out the best year for housing since 2007.
Sales jumped 10.8 percent last month to a 544,000 annualized pace, a Commerce Department report showed Wednesday. The Bloomberg survey median called for a 500,000 rate. For all of 2015, purchases climbed 14.6 percent to 501,000.
Employment gains and attractive mortgage rates combined to push new-home sales forward for a fourth straight year. Sustained hiring and income growth would provide further impetus for the market, encouraging more construction and contributing to the economy.
“The housing market is making progress, that’s going to continue this year,” Stan Shipley, an economist at Evercore ISI in New York, said before the report. “More people are coming into the market and they’re serious about the purchase.”
Estimates in the Bloomberg survey median ranged from 478,000 to 550,000. Sales rose to 491,000 in November, previously reported as 490,000.
The median sales price decreased 4.3 percent from December 2014 to $288,900, the report showed.
Purchases increased in all four U.S. regions, led by a 31.6 percent jump in the Midwest. Sales climbed 21 percent in the West.
The supply of homes at the current sales rate dropped to 5.2 months from 5.6 months in the prior month. There were 237,000 new houses on the market at the end of December compared with 231,000 a month earlier.
As concerns about the global economy have mounted and prompted a flight to the safety of U.S. Treasury securities, borrowing costs have declined for consumers since the Fed’s decision. The average rate on a 30-year fixed mortgage was 3.81 percent in the week ended Jan. 21, down from 3.97 percent in mid-December.
That’s prompted an increase in mortgage applications for home purchases. The three-month average of the Mortgage Bankers Association’s index that tracks those applications is the highest since 2010.
New-home sales, tabulated when contracts get signed, are considered a timelier barometer of the residential market than purchases of previously owned properties. The latter are calculated when a contract closes, typically a month or two later, and account for about 90 percent of the market.
The new-home sales report follows other recent data that indicate mixed progress for the industry.
Existing-home sales climbed more than projected in December to wrap up the best year since 2006, the National Association of Realtors reported on Jan. 22. Prices of previously-owned dwellings climbed as the supply of houses on the market was the smallest of any December since 1999.
While new home construction unexpectedly fell in December, 2015 was still the strongest year in eight, according to Commerce Department data.
The job market has been a pillar for housing. A jump in December payrolls capped the best back-to-back years for employment since 1998-99, and the unemployment rate is hovering near eight-year lows. At the same time, worker pay is sluggish. Average hourly earnings have been mostly stuck in the 2 percent range since the expansion began in mid-2009.
Prospective homebuyers may continue to benefit from low borrowing costs even after the Federal Reserve raised its benchmark interest rate in December for the first time since 2006. Central bank policy makers, who’ve said further moves will be gradual, are due to release a statement following their meeting on Wednesday.
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