Dec. 24 - U.S. new home sales came in strong - with prices continuing to rise despite higher mortgage rates. Bobbi Rebell reports.
Rising mortgage rates have not been the housing recovery dampener many had feared. New home sales came in strong in November - up more than 16 percent from a year ago. Though October was even better, it was revised upward, showing new home sales surged to a 5 year high that month. UBS economist Kevin Cummins: SOUNDBITE: KEVIN CUMMINS, ECONOMIST, UBS (ENGLISH) SAYING: "It certainly is encouraging. I mean if you look at the last 2 months as you mention, housing sales now are running well above where you were earlier in the year, despite higher mortgage rates. So what the Fed was worried about tightening in financial conditions over the summer didn't lead to any slowing in home sales as we see the latest two months for October-November. So that is certainly an encouraging sign heading into next year." But that fear of the Fed cutting back its support - and the trend of rising rates has probably gotten some home buyers off the fence - pulling sales earlier that would have normally been held off until the big spring selling season: Max Wolff, Chief Economist at ZT Wealth: SOUNDBITE: MAX WOLFF, CHIEF ECONOMIST, ZT WEALTH (ENGLISH) SAYING: "Probably some of the strength in housing we have seen in the last three to six months is actually people moving ahead of an anticipated increase in the interest rate, so that means we'll see a little less buying going forward." And in fact the pace of existing home sales has slowed since August. But if the labor market continues to improve - and wages increase - that could provide support for the housing market. Inventories also remain lean. The supply of homes on the market fell by 6.7 percent. And prices are going up. The median home price rose more than 10 percent from a year ago. And while the pace of increase is likely to moderate next year, Cummins believes the broader economy is benefitting from the higher price tags: SOUNDBITE: KEVIN CUMMINS, ECONOMIST, UBS (ENGLISH) SAYING: "The indirect effects of higher home prices should filter through to consumer confidence, and that spills over to spending and other indirect measures of the benefits of rising home price appreciation - into consumption and so forth." All of which could lead to better economic times for the New Year.