December New Home Sales

According to the Department of Commerce, new home sales grew 17.5 percent month-over-month in December to an annualized rate of 329,000 units.  The surge was a welcome development at the end of a record year.  The estimated 321,000 total homes sold in 2010 were down 14.2 percent from 2009, the lowest figure ever recorded.

The year finished with an inventory of 190,000 new homes for sale.  When December’s rate of sales is divided into the inventory, America is left with a 6.9 month supply.  This is within striking distance of the 6 month supply considered normal.  The western portion of the country was particularly active in reducing inventories as homes sales catapulted 71.9 percent for the month.  Prices firmed in the final month of the year as the median price paid jumped 12 percent while the average price paid increased 2.6 percent.

Overall the report has both good and bad components.  It is nice to see the inventory track closer to normal when measured in months.  But it still looks quite unhealthy when considering the number of units sold relative to the robust housing market of the past.  Perhaps the market for new homes is finally finding equilibrium, and new units will need to be built to keep up with future, albeit lower, demand.   This will help the construction industry, one of the hardest hit sectors in the labor market.