WASHINGTON, Dec 23 (Reuters) - New U.S. single-family home sales rose more than expected in November, reaching their highest level in four months, likely as expectations of higher mortgage rates drew buyers into the market.
The Commerce Department said on Friday new home sales increased 5.2 percent to a seasonally adjusted annual rate of 592,000 units last month. October’s sales pace was unrevised at 563,000 units.
Economists polled by Reuters had forecast single-family home sales, which account for about 9.5 percent of overall home sales, rising 2.1 percent to a 575,000-unit rate last month.
New home sales, which are derived from building permits, are volatile on a month-to-month basis and subject to large revisions. Sales were up 16.5 percent from a year ago.
Mortgage rates have been rising rapidly in the wake of Donald Trump’s victory in the Nov. 8 U.S. presidential election, which economists say could be pulling procrastinators into the market in fear of further increases in borrowing costs.
A report on Wednesday showed sales of previously owned homes rose to a near 10-year high in November. Trump’s plan to boost infrastructure spending and cut taxes is expected to stoke inflation.
Since the election, the interest rate on a fixed 30-year mortgage has increased more than 70 basis points to an average of 4.30 percent, the highest level since April 2014, according to data from mortgage finance firm Freddie Mac.
Mortgage rates are likely to rise further after the Federal Reserve raised its benchmark overnight interest rate last week by 25 basis points to a range of 0.50 percent to 0.75 percent. The U.S. central bank forecast three rate hikes for next year.
Higher borrowing costs come at a time when house price increases are outstripping wage gains, which could make purchases unaffordable for many first-time buyers. But economists see a marginal impact on home sales, as a labor market that is nearing full employment is expected to drive wages higher.
New single-family homes sales were unchanged in the Northeast and surged 43.8 percent in the Midwest to their highest level since October 2007. Sales fell 3.1 percent in the South, but jumped 7.7 percent in the West to their highest level since January 2008.
Despite the rise in sales last month, the inventory of new homes on the market increased 1.6 percent to 250,000 units, the highest level since September 2009. The rise in inventory, if sustained, could slow the pace of house price increases.
At November’s sales pace it would take 5.1 months to clear the supply of houses on the market, down from 5.2 months in October. A six-month supply is viewed as a healthy balance between supply and demand. (Reporting by Lucia Mutikani; Editing by Paul Simao)