New Home Sales Fall, But Prices Rise

According to Commerce Department data, sales of new single-family homes fell more than expected in December, but low inventories and growth in prices suggest a strong housing market to support the economy.

The report from the Commerce Department said new home sales fell 7.0 percent to a seasonally adjusted annual rate of 414,000 units. Sales were at a 445,000-unit pace in November.

The second straight month of declines in sales was somewhat softened by October's outsized 14.9 percent increase. Another factor that may have contributed to the declines was the extreme cold weather that blanketed most parts of the country last month.

Sales in the Northeast, which was hard hit by frigid temperatures, tumbled 36.4 percent to their slowest pace since June 2012. Home sales are traditionally weak during the winter, and last month's cold snap could have exaggerated the magnitude of the slowdown.

Though new home sales stumbled in the summer in the aftermath of a spike in mortgage rates, they have largely weathered the higher home loan costs against the backdrop of tight inventories and improving labor market conditions.

Housing is expected to have contributed significantly to economic growth last year, through residential investment and rising home prices that have boosted the net worth of households, allowing for greater discretionary spending.

For all of 2013, a total of 428,000 single family homes were sold. That was the most since 2008 and represented a 16.4 percent increase from the 2012.

Last month, the supply of houses on the market fell 2.8 percent to 171,000 units. That was the lowest since July.

The median price of a new home last month rose 4.6 percent from December 2012. New home prices rose 8.4 percent in 2013, the largest increase since 2005.

For all of 2013, the median new home price was $265,800, the highest on record.

At December's sales pace it would take 5.0 months to clear the supply of houses on the market. That was up from 4.7 months in November. A supply of 6.0 months is normally considered a healthy balance between supply and demand.