US new home sales retreat from record heights in December

FE Team | Published: January 26, 2018 22:08:33

WASHINGTON, Jan 26 (AFP): Sales of new US single family homes fell sharply last month from November's record heights, but closed out the year solidly above 2016, according to data released Thursday.
And despite the December dip, prices continued to climb even as inventories rose, pointing to persistently strong demand among home buyers, according to the monthly report from the Commerce Department.
New homes fell 9.3 per cent below the 10-year record set in November, to an annual rate of 625,000, seasonally adjusted, the report said. That was well below the 679,000 rate forecast by analysts, but still 14.1 per cent higher than December 2016.
Total sales in 2017 rose to an estimated 608,000 units, up 8.3 per cent over the previous year for the sixth straight annual increase.
Analysts largely dismissed December's decline and November's strength as noise in the volatile data, obscuring the general upward trend. They said economic conditions, such as falling unemployment, steady job creation and rising wages, favored strong housing demand.
"In short, exaggerated weakening after exaggerated strengthening. Through the volatility, the trend has been up," said Jim O'Sullivan, chief US economist at High Frequency Economics.
Existing home sales showed a similar pattern, slipping in December after a surge in November, but posting the strongest pace last year since 2006, according to the National Association of Retailers monthly report this week.
Inventories of new homes increased in December, with 295,000 new houses on the market at the end of the month, up 3.9 per cent and the highest since April 2009. At the current sales pace, that was equivalent to a 5.7 months supply, up from 4.9 months in November but the same as October.
The median sales price for a new home crept upwards by a token 0.2 per cent to $335,400, while the average price rose a steeper four per cent to $398,900, pointing to rising sales at the more upscale end of the market.
Sales fell for the month by about 10 per cent in the Midwest, the South and the West, but were marginally lower in the Northeast.
Market watchers have warned rising interest rates as well as recent changes to the federal tax code which hit homeowners could dampen public appetite for home buying.
But Ian Shepherdson of Pantheon Macroeconomics said, "What matters, behind all the noise, is the trend, which is rising slowly and should climb further over the first half."