New Home Sales Increase Again for January

Reports indicate Americans purchased more new homes in January after a decreased number of new homes sales were reported during the prior month, indicating that the housing market is healthy despite higher mortgage rates.

New home sales increased by 3.7 percent to a seasonally-adjusted 555,000, the Commerce Department reported last Friday. That is 5.5 percent higher than one year ago.

Solid job gains and some signs of an increase in wages have helped to drive consumer confidence. More confident consumers are more likely to purchase homes. Sales of existing homes jumped to their highest level in a decade, according to data released early last week.

The solid sales have occurred despite an increase in mortgage rates since the fall.  In fact, the rising rates may be prompting some to purchase homes now, as many buyers could be accelerating purchases to get ahead of any further rate increases.

Financial markets are anticipating more rapid growth and higher inflation as a result of President Donald Trump's tax cuts and deregulation initiatives. This has pushed interest rates up on both the 10-year Treasury note and mortgages.

The average 30-year fixed mortgage rate was 4.16 percent last week, virtually unchanged from the prior week, but up from the 2016 average of 3.65 percent.

Low mortgage rates and a strong and steady job market have helped the housing market recover from the recession. Reports indicate, home prices on average nationwide have returned to their pre-recession peaks to some degree, yet homeowners are carrying less debt and have more equity ownership of their homes now than during the bubble, which helps to alleviate any fears of a repeat.

A limited inventory of homes available has helped increase prices, but there are signs that builders focused on the new home market will be addressing the inventory issue.

Though further increases in inventory are needed, there were 265,000 new homes for sale at the end of January, up nearly 11 percent from a year earlier and the most in nearly eight years.