WASHINGTON (1/28/14)--A strong year for the housing market ended with a whimper last month.
New home sales dropped in December by a seasonally adjusted annualized rate of 7% despite climbing by 4.5% on a year-over-year basis, according to Commerce Department data released Monday.
The absolute number of sales, on a seasonally adjusted annualized basis, was 414,000, a drop from a downwardly revised November total of 445,000.
The supply of new single-family homes on the market, meanwhile, was down 2.8% to 171,000 on a seasonally adjusted annualized basis.
The seasonally adjusted median new home price subsequently dropped last month by 3.3% to $267,300, while the months' supply of homes for sale increased to 5, up from 4.7 in November (Economy.com Jan. 27).
Sales declined in all but one of the census regions, with purchases dropping by 36.4% in the Northeast, 8.8% in the West and 7.3% in the South. Sales were up by 17.6% in the Midwest.
Throughout 2013, however, 428,000 new homes were sold--an annual increase of 16.4% and a five-year high. After the housing bubble burst in 2008, sales hit a record-low of 306,000 in 2011. During the boom years, the number peaked at 1.28 million in 2005 (Bloomberg.com Jan. 27)
Moody's said that the drop-off appears to mirror meager payroll gains in December. The ratings and research firm's analysts attributed the dip to temporary uncertainty over interest rates driven by the Federal Reserve's quantitative easing tapering, which was announced in the middle of the month.
They intoned that a "surge in November housing starts" should entice buyers throughout the next few months and that developers aren't anticipating the weak demand to be lasting. But they also warned that if the economy doesn't add roughly 200,000 jobs per month this year, new-home purchase statistics will continue to be unimpressive.
The analysts did, however, say that 2014 will probably see improved economic growth, with uncertainty over the federal budget likely to be minimal for the next two years.
Bloomberg analysts, meanwhile, said that the weather could have contributed to the tepid demand. Snowfall was 21% above normal, and last month was the coldest December since 2009, the newswire said, citing a report from weather-data provider Planalytics.
A median forecast of 75 economists polled by Bloomberg has predicted December sales to be at 455,000. The lowest prediction in the survey, at 420,000, was higher than the number reported by the Commerce Department.