WASHINGTON- US home sales jumped to their highest level in nearly two years in December, the latest indication that lower mortgage rates are helping the housing market to regain its footing after hitting a soft patch in 2018, though record low inventory could be an obstacle to continued strong gains.
The report from the National Association of Realtors on Wednesday followed on the heels of government data last week showing homebuilding raced to a 13-year high in December.
Renewed housing market momentum could soften some of the hit on the economy from manufacturing as the thaw in US-China trade tensions is offset by Boeing’s suspension this month of production of its troubled 737 MAX plane.
“The previous weak link, housing, is coming back, but the current laggard, manufacturing, is slowing further,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
Existing home sales increased 3.6 percent to a seasonally adjusted annual rate of 5.54 million units last month, the highest level since February 2018, boosted by a surge in sales of multi-family housing units and gains in single-family home dwellings. November’s sales pace was unrevised at 5.35 million units.
Economists polled by Reuters had forecast existing home sales would increase 1.3 percent to a rate of 5.43 million units in December. Last month, existing home sales rose in the Northeast, West and the populous South. But sales fell in the Midwest.
Existing home sales, which make up about 90 percent of US home sales, surged 10.0 percent on a year-on-year basis in December. For all of 2019, sales were unchanged at 5.34 million units.
The report helped to lift the PHLX housing index. Stocks on Wall Street were trading higher, also cheered by an upbeat forecast from IBM and China’s efforts to contain a new flu-like virus outbreak. The dollar was little changed against a basket of currencies, while US Treasury prices were mixed.
The housing market is being supported by cheaper mortgage rates after the Federal Reserve cut interest rates three times last year. The 30-year fixed mortgage rate has dropped to an average of 3.65 percent from its peak of 4.94 percent in November 2018, according to data from mortgage finance agency Freddie Mac. — Reuters
