Surprise, Surprise: New Home Sales Jump

What does Wall Street know?

Sales of new homes rose 2.9 percent in December, the government said Friday, surprising Wall Street economists who expected a slight decline.

The Census Bureau reported that the annual pace of new home sales increased to 1.27 million in December (from 1.23 million in November), which was revised slightly lower. Economists surveyed by Briefing.com had forecast sales would slow to a 1.23 million annual rate.

Mortgage rates eased during the month, lowering the cost of buying a new home. Mortgage financing firm Freddie Mac said the average rate on 30-year, fixed-rate mortgages fell in December to 6.27 percent from 6.33 percent in November.

While mortgage rates slipped in December, they have gained over the last year, rising from an average 5.71 percent at the start of 2005. This uptick in mortgage rates, along with weaker confidence among home builders, have suggested signs of a cooling housing market.

In a sign of the slowing trend, the Commerce Department said Friday that gross domestic product, the broadest measure of the nation’s economic activity slowed to an annual growth rate of 1.1 percent in the fourth quarter, down from the 4.1 percent rate in the third quarter.

Much of the nation’s economic growth has been tied to the housing boom, which has created jobs in construction as well as spurred purchases of big-ticket household items such as refrigerators and washing machines.

A cooling off in the real estate markets could slow housing appreciation this year. The latest report shows prices for new homes down slightly from November, but it’s nothing major. Buyers looking to take out a Florida home loan, however, would be advised to look into their options while these prices are relatively low.