New-homes sales drop to end year

The Scotsman Guide - Victor Whitman - 27 January 2017

New-home sales slid in December, and the annual rate of sales ended the year slightly below the pace of 2015. The estimated number of new-home sales for all of 2016 was the highest since 2007, however, the U.S. Census Bureau reported. 

Sales of newly built homes were running at an annual pace of 536,000 in December, down 10.4 percent from November, the U.S. Census Bureau reported. December’s annual pace of sales also was 0.4 percent below the December 2015 level. The overall tally of new-home sales for 2016 totaled 563,000, which was up 12 percent over the 2015 level. 

Despite the dip in the December rate, economists are optimistic about new-home sales in 2017. The new-sales report tends to be volatile month-to-month, and the reading carries high margins of error. 

"Volatility is definitely the name of the game for this data, so it is definitely not something to get excited about," said Danielle Hale, director of housing statistics for the National Association of Realtors. "I wouldn’t be too worried about it if you take a smoother picture of a 12-month moving average."

She said new-home sales regionally have been tied to employment gains. The Northeast region has been gaining ground, whereas sales have been dropping in the Midwest and been running flatter in the South and West regions. 

"In areas where jobs are still being added, new-home sales are doing pretty well," Hale said. "Our forecast for next year expects continued job growth. I think this pause is just a pause [and sales] will continue to move up as we move into 2017."

As with housing starts, however, the annual pace of new-home sales is still lagging far behind the norm. 

"In a normal year, I would say that the new-home sales are just under 1 million," she said. "So, we are still way down from normal. There is still plenty of room to grow."

The National Association of Home Builders (NAHB) also expects sales to pick up this year. 

“We are encouraged by the growth in the housing sector last year, and by the fact that builders increased inventory by 10 percent in anticipation of future business,” NAHB Chief Economist Robert Dietz said.  

“NAHB’s forecast calls for continued upward momentum this year, with housing starts expected to rise 10 percent over the course of 2017,” Dietz continued.

Regionally, the Northeast experienced a 48 percent increase in sales over the November level, and the Midwest saw a decrease of 41 percent. Sales fell 1.3 percent in the West and 12.6 percent in the South.

The inventory of new-homes for sale was 259,000 in December, a 5.8-month supply at the current sales pace, the U.S. Census Bureau reported. The median sales price for a new home was $322,500.