Sales of new homes in the U.S. rose in December, closing a weak year for the housing market.
New-home sales increased 3.7% from a month earlier to a seasonally adjusted annual rate of 621,000, the Commerce Department said Tuesday.
Economists surveyed by The Wall Street Journal had expected new-home sales to decline to an annual rate of 605,000 in December. The rate in November was revised down to 599,000 from an initial estimate of 657,000.
“The big picture here is that sales are recovering from the 549,000 low in October, when activity likely was depressed by Hurricane Michael,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note to clients.
“The increase in mortgage applications last fall is starting to work through the numbers, and we expect further increases in sales—with an even-money chance of new cycle highs—in the spring,” he added.
The new-home sales figure is a rough estimate that comes with a big margin of error, which was 16.4% for the month-over-month change in December. The figure is often revised later.
Despite the report’s volatile nature, “the data are consistent with some of last year’s weakening being reversed as the year ended, helped by a decline in mortgage rates,” Jim O’Sullivan, Chief U.S. Economist at High Frequency Economics, said in a note.
The report on December home sales had been postponed because of the partial shutdown of the federal government.
Sales of new homes were down 2.4% in December compared with a year earlier. For 2018 as a whole, the estimated 622,000 rate of new homes built was 1.5% above the 613,000 in 2017.
Higher mortgage rates and a run-up in prices dented home purchases in 2018. The average rate on a 30-year, fixed-rate mortgage rose about 1 percentage point to nearly 5% from the start of 2018 to last November, according to Freddie Mac. The average rate has since fallen, to 4.35% in late February.
At the current sales pace, there was a 6.6-month supply of new homes on the market at the end of December, slightly below the 6.7-month supply in November.
Newly built homes are a slice of the overall housing market. Previously owned homes, known as existing homes, are the bulk of the market.
Existing-home sales fell 1.2% in January from the prior month, the National Association of Realtors reported last month, after last year marked the weakest for home sales since 2015.