Builder Incentives Shore Up Sales, but High Mortgage Rates Still a Headwind
Source: Economics Group of Wells Fargo Bank, N.A.
Summary
New Home Sales End 2024 on a Positive Note
New home sales bested expectations and rose 3.6% during December, the second consecutive monthly gain. The solid sales print adds to the evidence that the temporary late-summer dip in mortgage rates spurred a pick-up in residential investment in the fourth quarter of 2024. More recently, mortgage rates have crept up and are currently hovering around 7%. Although the new home market has become less sensitive to changes in interest rates thanks to home builders’ ability to offer rate buydowns and other pricing incentives, the elevated stance of financing costs threatens to discourage home buying in the months ahead. Elevated new home inventory levels and improved availability in the existing market stand as additional headwinds.