New home sales, up more than 16% from a year ago, came in very solid in November. In spite of rising mortgage rates, the housing market’s stability hasn’t wavered or been hindered. October was even better: New home sales rocketed to a five-year high.
Kevin Cummins, Economist at UBS, says, “It certainly is encouraging. I mean if you look at the last two months as you mention, housing sales now are running well above where you were earlier in the year, despite higher mortgage rates. So what the Fed was worried about tightening in financial conditions over the summer didn’t lead to any slowing in home sales as we see the latest two months for October-November. So that is certainly an encouraging sign heading into next year.”
Ironically, the concern about the Fed easing its support,coupled with rising rates, is probably what jolted early sales. Typically, some of these sales would have been held off until the big spring selling season.
Max Wolff, Chief Economist at ZT Wealth, says, “Probably some of the strength in housing we have seen in the last three to six months is actually people moving ahead of an anticipated increase in the interest rate, so that means we’ll see a little less buying going forward.”
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Since August, the stride of existing home sales has slowed down. However, if the economy follows suits (and wages increase), an improving labor market will serve as more support for the housing market.
On the downside, the amount of homes on the market fell by 6.7% while the median home price increased more than 10% from a year ago. According to UBS Economist Kevin Cummins, the pace will likely level out next year. But, the higher price tags are certainly helping the broader economy.
Kevin Cummins, Economist at UBS, says, “The indirect effects of higher home prices should filter through to consumer confidence, and that spills over to spending and other indirect measures of the benefits of rising home price appreciation – consumption and so forth.”
This could mean that happy times are ahead for next year’s economy.