Sales of new homes in the U.S. rose in December, closing a weak year for the housing market.
Harriet Torry of The Wall Street Journal had the news:
New-home sales increased 3.7% from a month earlier to a seasonally adjusted annual rate of 621,000, the Commerce Department said Tuesday.
Economists surveyed by The Wall Street Journal had expected new-home sales to decline to an annual rate of 605,000 in December. The rate in November was revised down to 599,000 from an initial estimate of 657,000.
“The big picture here is that sales are recovering from the 549,000 low in October, when activity likely was depressed by Hurricane Michael,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note to clients.
“The increase in mortgage applications last fall is starting to work through the numbers, and we expect further increases in sales—with an even-money chance of new cycle highs—in the spring,” he added.
Lucia Mutikani reported that the December sales were a seven-month high:
The housing market hit a soft patch last year amid higher mortgage rates, expensive lumber as well as land and labor shortages, which led to tight inventories and less affordable homes. Reports last month showed homebuilding dropping to more than a two-year trough in December and home resales in January hitting their lowest level since November 2015.
Though house price inflation has slowed and mortgage rates are hovering at 12-month lows, economists expect the housing market to remain weak for a while because of persistent land and labor shortages. Investment in homebuilding contracted 0.2 percent in 2018, the weakest performance since 2010.
In December, new home sales rose in the South, West and Northeast, but tumbled in the Midwest to their lowest level since April 2016. The median new house price fell 7.2 percent to $318,600 in December from a year ago.
“This is consistent with other indicators that point to a gradual slowing in housing sector activity,” said Pooja Sriram, an economist at Barclays in New York.
Andrea Riquier of MarketWatch.com reported that 2018 was still a tough year:
Through the noise, it’s clear that 2018 was a tough year for the new construction industry. Sales were just 1.5% higher than in 2017. The big question for the housing market is whether this is a downshift, or the beginning of the end of the cycle.
There are plenty of signs that Americans want to buy homes, but are constrained by the lack of affordable supply. Contract signings for sales of previously-owned homes roared higher in January, and mortgage applications soar whenever rates decline. Still, the headwinds remain, and with plenty of new rental stock in the most popular metro areas, some Americans may bow out of the house hunt.
Market reaction: Investors believe the spring-rebound narrative, if share prices of large publicly-traded builders are any guide. D.R. Horton, Inc. has seen 12% share price growth in the year to date, while shares of Meritage Homes Corporation and KB Home are both up more than 18% in that period.
