WASHINGTON (AP) — Americans bought more new homes in January after a steep fall-off the previous month, a sign the housing market is healthy despite higher mortgage rates.
New home sales rose 3.7 percent to a seasonally-adjusted 555,000, the Commerce Department said Friday. That is 5.5 percent higher than a year ago.
Solid job gains and some signs of rising wages have driven up consumer confidence, which has also risen since the presidential election. More confident consumers are more likely to buy homes. Sales of existing homes jumped to their highest level in a decade, according to data released earlier this week.
The solid sales have occurred despite, or perhaps because of, a jump in mortgage rates since the fall. Many buyers could be accelerating purchases to get ahead of any further rate increases.
Financial markets expect faster growth and higher inflation will flow from President Donald Trump’s tax cuts and deregulation initiatives. That has pushed up interest rates on both the 10-year Treasury note and mortgages.
The average 30-year fixed mortgage rate was 4.16 percent this week, little changed from the previous week. Still, that is up sharply from an average of 3.65 percent all last year.
Low mortgage rates and a steady job market have helped the housing market recover from its bubble and bust cycle a decade ago. By some measures, home prices on average nationwide have returned to their pre-recession peaks.
Yet homeowners are carrying less debt and have more equity ownership of their homes now than during the bubble, reducing fears of a repeat.
A limited supply of homes available has helped push up prices, but there are signs that in the new home market builders may be addressing the problem.
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.
Still, more home building is needed to address supply shortages. The number of existing homes on the market is near its lowest level since 1999.