New Home Sales Rise 5.9% Reflects Post-Storm Recovery

New home sales rise in the United States increased by 5.9% in November, reaching an annualized rate of 664,000 units. This rise follows a trend of recovery from delays in purchase agreements caused by storms in the South, with many people taking advantage of significant incentives to make purchases. The data was released by the government on Monday and was close to economists’ average estimate of 669,000.

Recovery in the South Following Hurricanes

Builders, especially in the South, the country’s largest housing construction region, worked to recover from the sales drop observed in October when hurricanes severely impacted activity. In November, sales in the South rebounded with an increase of nearly 14%, while the Midwest saw the fastest growth since 2021. However, sales in the Northeast and West declined.

Increased Supply of New Homes Eases Affordability

The housing market is also benefiting from an increase in the supply of properties, as the availability of new homes reached its highest level since late 2007. This increase is providing some relief in terms of affordability, as the median price of a new home dropped by 6.3% compared to last year, now standing at $402,600.

Builders’ Incentives to Boost Sales

To support buyers, builders have offered incentives such as purchasing mortgages, in which they assume payments to lower interest rates, and in some cases, they have reduced home prices. Additionally, builders gained confidence after Donald Trump’s victory in the recent elections, hoping that the incoming administration will reduce regulatory barriers and make development easier.

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Wall Street Concerns About the Impact of Incentives

Despite efforts to incentivize sales, Wall Street is increasingly concerned about the housing market. Analysts worry that sales incentives could erode profit margins and that high loan costs may deter investment. The iShares US Home Construction ETF reached an all-time high in mid-October but has since fallen by 20%.

High Interest Rates Could Persist Long-Term

Mortgage rates, which are approaching 7%, could remain elevated for the near future. The Federal Reserve, in its latest projections, indicated that there will be fewer interest rate cuts in 2025 as authorities remain focused on controlling inflation. Uncertainty regarding interest rates continues to affect market dynamics.

Existing Home Market Also Shows Signs of Improvement

In the existing home market, sales rose last month. This marked the fastest pace since March. However, new home sales are more immediate indicators. They reflect market activity, although the data can be volatile. These fluctuations impact the overall market trends and forecasting.

Change in the Official Data Release Date

The government report on new home sales and related data was initially scheduled for Tuesday. However, it was moved up. This change occurred due to an executive order from President Joe Biden. The order exempted federal employees from work on December 24.