Sales of newly built, single-family homes rose 12.2% in 2016 to 563,000 units, the highest annual rate since 2007, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. New home sales fell 10.4% in December 2016 to a seasonally adjusted annual rate of 536,000 units.

“We are encouraged by the growth in the housing sector last year, and by the fact that builders increased inventory by 10% in anticipation of future business,” said Robert Dietz, chief economist of the National Association of Home Builders. “National Association of Home Builders’ forecast calls for continued upward momentum this year, with housing starts expected to rise 10% over the course of 2017.”

“To ensure sales continue to move forward in 2017, builders need to price their homes competitively, especially given that mortgage interest rates are expected to rise this year,” said National Association of Home Builders Chairman Granger MacDonald.

The inventory of new home sales for sale was 259,000 in December, which is a 5.8-month supply at the current sales pace. The median sales price of new houses sold was $322,500.

Regionally, new home sales increased 48.4% in the Northeast. Sales fell 1.3% in the West, 12.6% in the South and 41% in the Midwest.