Weather May Have Obscured Improving Trend
- New Home Sales for December decreased by 7.3 percent, to a 369,000 unit annual rate.
- The Months’ Supply of new homes increased in December to 4.9 months’ worth.
The new home sales data continues to balk at providing a simple reinforcement of what everyone now takes for granted, that housing market conditions are improving in most major markets. The most likely explanation is that Hurricane Sandy washed out sales in October, they came roaring back in November, and then corrected from the correction in December. Underlying the zigs and zags through the second half of 2012 we can make out at an upward trend that needs to be extended if it is to be believed. December new home sales fell by 7.3 percent from an upwardly revised strong November reading of 398,000, down to a 369,000 unit annual rate. December new home sales are up 8.8 percent from a year ago. Completions of new single-family housing units were up 16.3 percent in December, so it is fair to say that construction is still ahead of sales, unless the sales data get revised up. The months’ supply of new homes for sale has crept back up to 4.9 months’ worth, where it was last April. This is a significantly tighter supply than we saw during the depths of the recession when the supply of new homes for sale peaked at 12.2 months’ worth in January 2009, but it is not tight by historical standards. From 2001 through 2004 the supply of new homes for sale hovered close to 4.0 months’ worth. The median sales price of a new home in December was $248,900, up 13.9 percent from a year earlier. The most likely trend for housing markets and new home sales in particular is to continue to improve through 2013. However, there is a disconnect between construction data and sales data that suggests that builders may be getting a little ahead of themselves at a time when households are feeling a headwind from fiscal tightening. Recently strong labor market indicators may be the counterweight to fiscal tightening, but that remains to be seen.
Market Reaction: U.S. equity markets opened with gains. Treasury yields are up. NYMEX crude oil is up to $96.14/barrel. The dollar is up against the yen and down versus the euro.
Click here for a PDF version of the Comerica Economic Alert: Home Sales 012513.