ETFs To Gain On Positive US New Home Sales Data

The latest new home sales data for November is encouraging to an extent. Per the Commerce Department data, new home sales inched up 1.3% to a seasonally adjusted annual rate of 719,000 units in the month. This compares favorably with October’s sales pace  that was revised downward to 710,000 units from the previously reported 733,000 units. Meanwhile, Reuters’ economists had forecast a rise to 734,000 units in November. Year over year, new home sales rallied  16.9%.

New home sales, which make for 11.8% of housing market sales, declined 4.1% in the South but surged 52.4% in the Northeast in November. Meanwhile, sales were flat in the Midwest and gained 7.5% in the West.

Moreover, in comparison to 5.5 months needed to deplete the supply of homes in October, the latest data suggests that 5.4 months will suffice at the current pace. However, in November, the number of new homes in the market were unchanged in comparison to October’s level and totaled 323,000. Also, the median new home price in November was $330,800, up 7.2% year over year. Interestingly, new home sales were at the higher end of the $200,000-$400,000 price range compared with those costing below the usual mark of $200,000.

Current Housing Market Scenario

After three rate cuts in 2019, the Fed hinted at keeping the interest rates intact in 2020 unless there is any major change in the economic outlook. It is widely believed that declining mortgage rates cushioned the housing sector as lower borrowing costs are making new houses more affordable. In fact, mortgage rates are currently at a low per historical standards. According to Freddie Mac, the average of a 30-year, fixed-rate mortgage was 3.73% as of Dec 12 and compares favorably with 4.94% in November 2018. Moreover, residential investment regained momentum in the third quarter after shrinking for six consecutive quarters.

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