WASHINGTON - 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
"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 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
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.
But analysts are looking for housing
to regain some of its lost momentum as the industry enters the all-important
spring buying season. Analysts expect that continued improvements in the labor
market will boost incomes and that will lead to stronger demand for homes.
Sales of previously occupied homes
rebounded 1 percent in December helping that market to sales for all of 2013 of
5.09 million. That was the best performance since 2006 when sales totaled 6.48
million. However, the sales gains in both 2005 and 2006 represented an
unsustainable housing boom which collapsed, helping drag the economy into a
deep recession which triggered a painful retrenchment in housing.
Analysts expect housing will keep
recovering in 2014 but they don't look for the sales gains to be as large as
they were in 2013.
Economists at Global Insight predict
that growth of existing home sales will slow a bit from the 8.8 percent gain in
2013 but still show a respectable increase of 5.1 percent in 2014.
Mortgage rates rose in the summer to
nearly a full percentage point higher than they were in the spring, when they
were at record lows. And a limited supply of homes on the market helped drive
up prices. The combination of rising mortgage rates and rising prices made home
buying less affordable, particularly for first-time buyers.
Builders started work on 923,000 new
homes and apartments in 2013, up 18.3 percent from 2012. It was the fourth
straight annual gain and the strongest construction pace since 2007 when 1.36
million homes were started.