New-home sales will likely decline in the next couple of months because of higher mortgage rates. New-home sales increased to a seasonally adjusted annual rate of 592,000 in November. This is 5.2% above the October rate. So far, the increase in interest rates hasn’t had a significant impact on new-home sales, which tend to be affected before existing-home sales. New-home sales are reported when the contract is signed, whereas existing-home sales are reported when the contract closes, which takes more than 30 days. We’ll see the impact of higher mortgage rates on new-home sales in the next couple of months.
Sales of existing homes are also likely to drop in the next few months. Total existing-home sales rose 0.7% in November to a seasonally adjusted annual rate of 5.61 million — the highest pace since February 2007. Pending sales, however, declined in November. The National Association of Realtors reported that its pending home sales index, which tracks contracts signed for purchase of existing homes, dropped 2.5% last month. The decrease is the first in three months and reflects a rise in interest rates that began after the presidential election. Mortgage rates have risen about a half percentage point since then. A 30-year fixed rate mortgage averaged 4.32% for the week ending December 29, up from 4.01% a year earlier.