Purchases of new homes increased in November to the second-fastest pace in almost nine years as the beginning of a spike in mortgage rates persuaded buyers to quickly sign contracts.
Sales rose 5.2% to a four-month high of a 592,000 annualized pace, Commerce Department data showed Friday. The median forecast in a Bloomberg survey was for a 2.1% gain to 575,000. The advance included the largest gain in the Midwest market since October 2012 and the fastest pace of demand in the West in almost nine years.
Home sales are closing in on the strongest year in a decade, supported by a robust labor market and, until recently, the lowest mortgage rates since the 1970s. Progress has been gradual, however, with residential construction contributing little to economic growth as higher prices and stricter lending standards turn more Americans into renters.
Estimates in the Bloomberg survey for sales ranged from 540,000 to 600,000. The department said there was 90% confidence that the change in sales last month ranged from an 8.9% drop to a 19.3% increase, underscoring the volatility of the data.
Sales in the Midwest jumped 43.8% to a 92,000 annualized rate, while purchases in the West climbed 7.7% to a 154,000 pace, the strongest since January 2008. Demand in the South declined 3.1%.
The supply of homes fell to 5.1 months from 5.2 months in October. There were 250,000 new houses on the market at the end of November, the most since September 2009. The median sales price of a new house decreased 3.7% from November 2015 to $305,400.
New-home sales, which account for about 10% of the residential market, are tabulated when contracts are signed. That makes them a timelier barometer than transactions on existing homes.
Those previously owned home sales unexpectedly climbed in November to the highest level since February 2007, National Association of Realtors data showed Wednesday. Contract closings, which reflect signings made a month or two earlier, rose 0.7% to a 5.61 million annual rate, even as inventory declined from the previous year for the 18th straight month.
Until recently, residential real estate has been supported by historically low mortgage rates. Since the election of Donald Trump, borrowing costs have spiked in anticipation that the president-elect’s economic plans will generate more inflationary pressure. What’s more, the Federal Reserve is projected to keep raising its benchmark interest rate in 2017.
The average rate on a 30-year fixed mortgage surged to 4.3% in the week ended Dec. 22, the highest since April 2014, according to Freddie Mac figures.