Americans pulled back sharply from buying new homes in December, but sales for all of 2016 were the highest since 2007.
The Commerce Department said on Thursday that new-home sales last month fell 10.4 percent to a seasonally adjusted annual rate 536,000. But sales totaled 563,000 in 2016, up 12.2 percent over the past year.
Much of the sales growth during 2016 came from low mortgage rates and a steadily improving job market. But 2017 begins with some of that momentum possibly stalling as mortgage rates have risen since the November presidential election, worsening affordability and potentially curbing sales growth as more buyers cope with affordability issues.
“Sales suffered in December as a jump in mortgage rates clearly had a chilling effect on activity,” said Joshua Shapiro, chief U.S. economist at the consultancy MFR. Still, Shapiro expects that the healthy jobs market will support continued home sales.
In the wake of Donald Trump’s presidential victory, financial markets are expecting faster economic growth from tax cuts and rising levels of inflation. Interest rates for both the 10-year Treasury note and mortgages have swung higher as a result.
Mortgage buyer Freddie Mac said on Thursday that the rate on 30-year fixed-rate loans averaged 4.19 percent. That was dramatically higher than a 30-year rate that averaged 3.65 percent for all of 2016, the lowest level recorded from records going back to 1971.
The low rates and a shortage of inventory have also boosted prices.
The median sales price for a new home in December was $322,500, a 7.8 percent increase over the past year that easily outpaced average wage growth.
New-home purchases fell in the Midwest, South and West last month and increased in the Northeast. Sales of new homes can be volatile on a monthly basis.
As rates rise, there are other signs that would-be buyers are holding off.
The National Association of Realtors said Tuesday that sales of existing homes fell 2.8 percent last month to a seasonally adjusted annual rate of 5.49 million.