US New Home Sales Rebound in November, But Rising Mortgage Rates Loom
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Sales of new US single-family homes rebounded in November after being depressed by hurricanes the previous month, according to the Commerce Department's Census Bureau. However, rising mortgage rates could dampen sales in the coming year, reports Reuters.
New home sales jumped 5.9% to a seasonally adjusted annual rate of 664,000 units last month. This is significantly higher than October's revised rate of 627,000 units, which was initially reported as 610,000 units.
Economists polled by Reuters had anticipated a rebound to 660,000 units. It's important to note that new home sales, representing about 15% of total US home sales, are recorded at contract signing and can fluctuate considerably on a monthly basis. Despite the month-over-month increase, new home sales were still up 8.7% year-over-year in November.
However, rising mortgage rates pose a significant challenge to the housing market in 2025. The average rate on the popular 30-year fixed-rate mortgage climbed to 6.72% last week, according to Freddie Mac, following a slight dip the previous week.
The Federal Reserve, aiming to combat inflation, raised its benchmark overnight interest rate by 25 basis points last week, bringing the target range to 4.25%-4.50%. However, the Fed now anticipates only two rate cuts in 2025, a significant reduction from its September projection of four cuts. This shift reflects the Fed's assessment of the economy's continued resilience and persistent inflation.
Uncertainty surrounding the policies of President-elect Donald Trump's incoming administration is also contributing to the cautious outlook. Economists warn that Trump's potential policies, including tariffs, tax cuts, and mass deportations, could exacerbate inflationary pressures.
The yield on the US 10-year Treasury note, which influences mortgage rates, reached a fresh 6-1/2-month high last week. This trend suggests that mortgage rates are likely to remain elevated in the near term, potentially posing a headwind to the housing market's recovery.