New home construction is an important part of balancing the housing market. When inventory is low and prices are rising, building more new homes can help level the imbalance and provide better affordability conditions for buyers of all types of homes. But builders don't build more homes unless there are interested buyers. That's why keeping an eye on new home sales can help buyers get a feel for what's happening in the overall market. If new home sales are rising, builders are more likely to build more homes, which helps inventory and ultimately home buyers.
So what's happening now in the new home market? Well, according to the latest numbers released by the U.S. Census Bureau and the Department of Housing and Urban Development, new home sales rose 2.3 percent in December, matching economists' expectations for the month. But while the month-over-month improvement is encouraging, sales are still down significantly from year-before levels, mostly due to the increase in mortgage rates that slowed buyer demand last year.
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