Sales of new homes remain at some of the highest levels since 2008 despite an uptick in interest rates and rising home prices.
According to data released by the government, there were a total of 464,000 new home sales for the month of November. This was down 2.1% from the previous month but still very promising by many estimates. Sales of new homes remained up 17% when compared to 2012.
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Concerns Over Rising Rates
The news comes shortly after the Federal Reserve finally announced that it would begin tapering the stimulus that it has been providing to the economy. Ben Bernanke, the Chairman of the Federal Reserve, said that he remains optimistic about the sustainability of the economic recovery. Accordingly, the Fed will begin to withdrawal about $10 billion dollars every month of stimulus money.
Officials at the Federal Reserve have expressed concerns for a long time that an increase in interest rates could undermine the housing recovery. But so far the markets have seemed to grow accustomed to the new rates without significant problems.
RDQ Economics analysts have written that the data suggests the housing market remains healthy going into the New Year. “The data fit the narrative that the mid-summer backup in rates initially hit home sales…but the sticker shock effect quickly wore off,” they said.
Home Sales in the Coming Year
Aside from housing data, there are other signs which would seem to point to further improvements in new homes sales. Unemployment continues to fall as the labor markets are on a path to gradual recovery and consumer confidence continues to rise.
Businesses remain generally optimistic about the general health of the housing recovery and have been more willing to invest than in years past. “Businesses have been sidelined for quite some time, hesitant to invest in equipment, structures and certainly employees,” said Lindsey M. Piegza, chief economist at the investment banking and brokerage firm Sterne, Agee & Leach, in a research note. “However, as certainty appears to have returned to Washington in terms of spending and tax policy — at least through 2015 — businesses (and consumers) are beginning to loosen their purse strings, particularly amid improving global demand.”
It’s worth mentioning that the housing recovery hasn’t been felt equally in all areas. For example, there is a tremendous disparity between home sales in the West and Midwest. Home sales in the West rose by an extremely healthy 31.1% whereas home sales in the Midwest fell by 26.6%. Areas in the South also experienced a decline in home sales by around 9%.
There are, however, new lending rules scheduled to take effect in the coming year which will make it more difficult to get a loan. The new regulations are part of the Dodd-Frank act which was passed with the stated purpose of making it less likely that another economic crash would occur. The new rules will take effect in January, so there is still a tiny window of opportunity to be had in applying for a loan in the coming days.
