WASHINGTON, Dec. 27 (UPI) -- The lowest mortgage rates in 31 years helped lift sales of new single-family homes 5.7 percent to a record seasonally adjusted annual pace of 1.069 million annual units from 1.011 million units in October.
Economists on Wall Street were expecting the Commerce Department's report to show new home sales declining 0.7 percent to a 1-million-unit annualized pace during the month after falling 4.5 percent in October.
The report provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments.
By tracking economic data such as new home sales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.
Analysts said each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy.
Once the home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic ripple effect can be substantial.
Since the economic backdrop is the most pervasive influence on financial markets, new home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.
Analysts said low mortgage rates and appreciating home prices are helping to keep the housing market percolating.
Freddie Mac reported the 30-year fixed-rate mortgage fell to 5.93 percent -- its lowest level since 1965.
Frank Nothaft, Freddie Mac chief economist, said, "2002 was an amazing year for the housing sector. The annual average for the 30-year fixed-rate mortgage rate this year was about 6.5 percent, the lowest annual average in more than 31 years.
"That was the primary factor that led to an incredible amount of home building, home sales and refinancing, all of which helped keep the economy from another recession," he said.
"The outlook for the future is rosy as we start out the new year with mortgage rates at or below 6 percent across the nation," Nothaft added.
New homes account for about 15 percent of all houses sold.
The latest report from the Commerce Department showed the median price of a new home fell to $167,300 from $178,900 in October and from $176,100 in September.
The inventory of new homes for sale fell to a 3.8 month supply, their lowest level since last December, and down from 4 months in October.
The number of new homes for sale fell to 337,000 from 339,000 in October.
By region, sales jumped 41.2 percent in the Midwest to an annual pace of 257,000 units and rose 2.4 percent in the South to an annual pace of 475,000 units. Sales sank 26.7 percent in the Northeast to an annual rate of 44,000 units and dropped 3.9 percent in the West to 293,000 homes at an annual rate.
