New Home Sales Slump in December But Finish Year Strong

New home sales slumped in December but finished 2016 with its strongest year since 2007, HUD and the Census Bureau reported yesterday.

The report said new single-family home sales came in at a seasonally adjusted annual rate of 536,000 in December, down by 10.4 percent from November’s revised 598,000 and 0.4 percent below a year ago (538,000).

Regionally, only the smallest area, the Northeast, saw gains, rising by 48.4 percent in December to 46,000 units, seasonally adjusted, rom 31,000 in November, and improved by the same percentage from a year ago. In the largest region, the South, sales fell by 10.4 percent to 536,000 units from 598,000 units in November and fell by 0.4 percent from a year ago. In the West, sales fell by 1.3 percent to 156,000 units from 158,000 in November but improved by 2.0 percent from a year ago. In the Midwest, sales fell by 41.0 percent to 49,000 units from 83,000 in December and fall by 29.0 percent from a year ago.

However, HUD/Census estimated 563,000 new homes were sold in 2016, 12.2 percent higher than 2015 (501,000) and the highest rate since 2007.

HUD/Census reported the median sales price of new houses sold in December was $322,500; the average sales price was $384,000. The seasonally adjusted estimate of new houses for sale at the end of December fell to 259,000. This represents a supply of 5.8
months at the current sales rate.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said a spike in mortgage rates and strong winter weather played a role in the December slump.

“We also note that December is a lighter month for sales, and therefore the magnitude of the monthly swings tends to be exaggerated,” Vitner said.

Ralph McLaughlin, chief economist with Trulia, San Francisco, said the overall strong year reflected a combination of solid demand from homebuyers and new home building that reached post-recession highs.

“While new home sales continued their steady climb in 2016, there remains room for growth,” McLaughlin said. “New home sales represented only about 10.4 percent of all home sales last year, which is well below the pre-recession average of 16.2 percent. Given the depths that existing home inventory has fallen, homebuyers could use much more relief from new home construction than what they’ve received thus far into the housing market recovery.”