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December 21, 2014

New-Home Sales Fall 7% in December

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New-Home Sales Fall 7% in December

New-home sales dropped in December for the second consecutive month, as some economists blamed inventory shortages and frigid temperatures. New-home sales fell 7 percent to a seasonally adjusted annual rate of 414,000 units, but some housing analysts say that steady price gains and lean inventories are keeping the housing recovery on track, the Commerce Department reports.

New-home sales were still up overall for all of 2013, posting a 16.4 percent increase over 2012.

The Northeast, which has been battling a month of frigid temperatures, faced the largest drop in new-home sales in December, plummeting 36.4 percent to the slowest pace since June 2012.

New-home sales also dropped by 8.8 percent in the West and 7.3 percent in the South, the Commerce Department reports. Meanwhile, they rose 17.6 percent in the Midwest.

In December, the supply of houses on the market dropped 2.8 percent, the lowest since July, and settling at a five-month supply. The sector generally considers a six-month supply of homes for sale healthy for the market.

"There has been some pause in sales; some of that may be supply-related rather than demand-related," Samuel Coffin, an economist at UBS in New York, told Reuters. "If you look at the inventory data for new and existing homes, they don't look consistent with a big fall-off in demand."

Mortgage rates began to rise last May, which some analysts cautioned may hamper sales. However, “consumers are getting used to more realistic mortgage rates, which still remain favorable on a historical basis," says David Crowe, chief economist for the National Association of Home Builders."As household formations and pent-up demand continue to emerge, we anticipate that 2014 will be a strong year for housing." 

Source: National Association of Home Builders and “New Home Sales Fall, But Private Sector Expands,” Reuters (Jan. 27, 2014)

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