Sales of new single family homes in December rose to their highest level in 10 months as buyers snapped up cheaper homes in anticipation of higher interest rates.

The increase put the seasonally adjusted annual sales pace to 811,000 for the month, according to the Commerce Department, an 11.9% increase over November’s figure, which was revised down to 725,000 from 744,000.

The median price of a new home, the point where half the homes sold for more and half for less, fell to $377,700, last month, its lowest level since June but about 4% higher than December 2020.

In the months following the pandemic outbreak in the spring of 2020, new home sales exploded as people sought out more space. Including December’s big increase, sales for 2021 fell 14% from the red-hot 2020.

New home sales rose in three of the four regions, with the Midwest leading the way with a whopping 56.4% increase. Sales rose 14.9% in the south and nominally in the West, offsetting a 15.6% decline in the Northeast.

Historically low mortgage rates have fed the demand for housing, even though rates are expected to rise as the Federal Reserve dials back its bond purchases to tamp down surging inflation. Mortgage buyer Freddie Mac says the average rate on long-term, 30-year mortgages in the U.S. has risen from just over 3% a month ago to 3.5% last week, the highest level since March 2020.

Just as the Fed is expected to announce its first rate hike since the pandemic began, the Mortgage Bankers Association reported Wednesday that for the week ending Jan. 21, mortgage applications fell 7.1% from the previous week with an even bigger downturn — about 13% — in the number of people seeking to refinance existing mortgages.

The National Association of Realtors reported last week that sales of previously occupied homes fell in December for the first time in four months as many would-be buyers bailed, frustrated by the lowest level of available houses in more than two decades.

Median prices for existing homes have also risen at a furious pace, jumping nearly 16% from a year ago to $358,000. Homes sold in an average of 19 days and the number of houses for sale slumped to just 910,000 in December, the fewest since records began in 1999. The lack of previously occupied homes has put additional pressure on homebuilders, who have amassed huge backlogs of orders to fill in 2022.

(AP)