US sales of new homes drop 7 percent in December

Published on NewsOK Modified: January 27, 2014 at 11:58 am •  Published: January 27, 2014
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WASHINGTON (AP) — U.S. sales of new homes fell in December for a second consecutive month but even with the pause at the end of the year, sales for all of 2013 climbed to the highest level in five years.

Sales of new homes dropped 7 percent last month to a seasonally adjusted annual rate of 414,000, the Commerce Department reported Monday. In November, sales had fallen 3.9 percent.

For the whole year, sales were up 16.4 percent to 428,000, the highest level since 2008.

It marked the second year that sales have risen after six consecutive annual declines as the housing industry was rocked by the collapse of a housing bubble. Sales of new homes peaked at 1.28 million in 2005.

Economists said continued job gains and a strengthening in the overall economy should help boost sales further in 2014.

"We continue to be upbeat about the outlook for new home sales," said Paul Diggle, an economist at Capital Economics. "Mortgage rates are very low in a historical context."

Analysts said much of the December drop in sales likely reflected severe weather in many parts of the country during the month and some of those factors will likely act to depress sales further in January.

By region, sales fell the most in December in the Northeast, a decline of 36.4 percent. Sales were down 8.8 percent in the West and 7.3 percent in the South. Sales rose 17.6 percent in the Midwest.

The median price of a new home was $270,200 in December, up 4.6 percent from a year ago and up 0.6 percent from November. The median is the point where half the homes sell for more and half for less.

There were 171,000 new homes on the market at the end of December, a drop of 2.8 percent from November. At the December sales pace, that would represent a 5 month supply. That is lower than the six-month supply that economists view as healthy.

Housing was one of the strongest sectors of the recovery in the first half of 2013, but then it hit a lull during the summer when mortgage rates jumped on indications the Federal Reserve might soon start reducing the bond purchases it was making to keep long-term interest rates low.

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