(Bloomberg) -- Sales of new US homes rose for a third month in December, wrapping up an otherwise disappointing year in which soaring borrowing costs stifled demand and weighed on the economy.

Purchases of new single-family homes increased 2.3% to an annualized 616,000 pace after a downward revision to the prior month, government data showed Thursday. The median estimate in a Bloomberg survey of economists called for a 612,000 rate.

Some 644,000 houses were bought in 2022, the smallest annual total in four years, as aggressive monetary policy tightening by the Federal Reserve pushed mortgage rates up sharply. Combined with prices that were slow to decline, home-buying conditions late last year were the worst in a generation.

Still, the residential real estate market is starting to stabilize. Mortgage rates continue to retreat and are back below 6% while prices are cooling. Builder sentiment rose this month for the first time since 2021. D.R. Horton Inc., one of the largest US builders, reported quarterly results this week that beat expectations while expressing optimism about future demand.

The government’s report showed sales climbed in two of four regions, led by a more than 35% jump in the Midwest. Sales dropped in the Northeast and West.

The report, produced by the Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home rose 7.8% from a year earlier to $442,100.

Housing Inventory

There were 461,000 new homes for sale as of the end of last month, though the majority remain under construction or not yet started. The number of homes sold in December and awaiting the start of construction — a measure of backlogs — increased to the highest since March.

The number of completed homes that were sold in December declined.

The weakening in housing last year weighed on the economy. The government’s initial estimate of fourth-quarter gross domestic product showed residential investment subtracted 1.29 percentage points from growth. 

New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously-owned homes, which are calculated when contracts close. 

Still, the new-homes data are volatile. The report showed 90% of confidence the change in sales ranged from a 16.2% decline to a 20.8% increase.

--With assistance from Jordan Yadoo.

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