December New Home Sales

Government agencies released their December report on new home sales and it was a disappointment by almost any measure.  First, while consensus expectations were for 320,000 units to be sold, in fact just 307,000 sales were registered.  In turn this actually caused the available supply to rise just a tad to 6.1 months.  We still want to see supply decline in the hope that such action will cause prices to firm.  Thus the 0.1 months increase in available units reported, while slight, was a little bit of a downer.  Illustrating this knock-on effect we saw prices continue their decline with the median price in December down a huge 2.5% to $210,300.

Recently we have begun to see various ancillary reports suggesting a recovery in housing may be in its earliest stages but this report certainly provides no support to that view.  When lower prices and rock bottom mortgage rates cannot combine to lift sales we must retain a cautious wait and see attitude to the overall recovery of America’s economy.  Recent commentary from the Federal Reserve adds to our concerns as their most recent official release was full of qualifications and cautions.

Year-over-year the median for new home prices has now declined by 12.8% which is the worst level since the current recovery was declared to have begun.  However we have been seeing some signs of life in other indicators that we follow.  The existing home sales report which came out just a few days prior to this one demonstrated a different and much more positive result.  Further it represents a much bigger market than new construction.  Despite the negative tone the new home sales data evidences, we hope to continue seeing more positive data come available in the near future.