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New Home Sales Jump in December

increaseSales of newly built homes saw a sharp increase in December, underscoring hopes of a resurgence in a market that's been struggling over the past year.

The Commerce Department estimated Tuesday that new home sales in December were at a seasonally adjusted annual rate of 481,000, a jump of 11.6 percent from November's downwardly revised sales rate of 431,000. Economists had expected a smaller increase in sales to a rate of 452,000, while the Mortgage Bankers Association forecast a rate of 409,000.

While December's report showed a solid increase, the month's activity did little to lift overall new home sales for the year. Throughout all of 2014, the government estimates new home sales came in at 435,000, up just 1.2 percent from 2013 as poor numbers in spring and early summer took a toll.

Still, assuming last month's numbers aren't badly impacted by revisions, it's an encouraging way to end last year and start 2015. In a recently released outlook, the National Association of Realtors (NAR) predicted new home sales would come up 37 percent in the coming year. Though other forecasts are less optimistic (Fannie Mae projects a 17.8 percent increase), hopes are still high all around, especially as the Obama administration takes steps to boost access to homeownership.

The first of those steps—a reduction in the Federal Housing Administration's annual mortgage insurance premiums—took effect Monday. While the cut is targeted toward helping first-time homebuyers, it should have a trickle-up effect on repeat buyers, say IHS Global Insight economists Patrick Newport and Stephanie Karol.

"As more first-time buyers are empowered to purchase an existing home, the sellers of those homes will be in a better position to put down a deposit on a new one," they wrote in an analytical note.

Economists also hope that improvements in the labor market and consumer wages will spur an increase in household formations.

One other major obstacle has diminished at least somewhat in the last year: The Commerce Department says the supply of new homes for sale at the end of December was a seasonally adjusted 219,000, a slight increase over November's stock. New home supply has been on the rise for 10 consecutive months now.

Prices also rebounded after a decline in November. The median price of a new home sold last month was $298,100, up from $291,600, while the average price was $377,800, up from $344,600, the Commerce Department reported.

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.
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