New Home Sales Disappoint, Prices Keep Rising

The Commerce Department reported(.pdf) that new home sales dropped from an upwardly revised annual rate of 398,000 units in November (originally reported as a rate of 377,000) to just 369,000 units in December, far below analysts’ expectations for a rate of over 400,000. Home prices, however, continued to rise.

The November sales rate was the highest since April of 2010, back when various government home buying incentive programs were underway. While down from the month prior, the December rate was one of the highest in recent years, representing a hefty 8.8 percent increase from a year earlier, though that’s hard to see in the graphic below because new home sales remain far below where they were a decade ago.

Full-year 2012 sales came in at 367,000, up nearly 20 percent from 306,000 in 2011, and the median sales price rose from $245,600 in November to $248,900 in December, now up 13.9 percent from a year earlier and the highest median price in more than five years. It’s worth remembering that new home prices can be deceiving due to builder incentives and other factors that are not reflected in the price, but, these price gains are consistent with other home price indexes showing double-digit year-over-year gains.

With 151,000 new homes on the market, a 4.9 month supply at the current sales rate, inventory remains near recent record lows despite increased activity by homebuilders that have seen housing permits and starts reach their highest level since early-2008, just before the start of the financial crisis.