US sales of new homes fall unexpectedly in Dec

Numbers point to softening of housing recovery

Sales of newly built US single-family homes fell unexpectedly in December, data showed yesterday, the latest indication that the government- led housing recovery might be losing some steam.

The Commerce Department said that sales fell 7.6 per cent to a 342,000 unit annual rate from an upwardly revised 370,000 units in November. It was the second straight month that new home sales declined.

Analysts polled by Reuters had expected new home sales to increase to a 370,000 unit annual pace from November’s previously reported 355,000 units.

New home sales for the whole of 2009 fell 22.9 per cent to a record low 374,000 units, the department said.

The housing market recovery is showing some signs of fatigue after a surge in sales as first-time buyers rushed to take advantage of a popular tax credit, which had been scheduled to expire in November.

It has since been expanded and extended until June this year. While analysts expected home sales to pick up as a result, they reckoned that the pace will not be as strong as witnessed with the initial tax credit.

The housing market was the main catalyst of the most painful downturn in 70 years, and renewed weakness could hobble the economic recovery.

Despite the slump in sales, there were a few bright spots in yesterday’s report. The median sale price for a new home rose 5.2 per cent last month from November to US$221,300, the highest in seven months and the biggest rise since April 2009. Compared to December 2008, the median sale price fell 3.6 per cent.

The number of new homes on the market last month dropped 1.7 per cent to 231,000 units, the lowest level since April 1971.

However, December’s weak sales pace left the supply of homes available for sale at 8.1 months’ worth, the highest since June 2009, from 7.6 months in November.

New home purchases, while accounting for less than 10 per cent of the market, are considered a leading indicator because they are based on contract signings.

Source: Business Times, 28 Jan 2010