Monday, January 31, 2005

U.S. Dec. new home sales flat as inventories build


By Rex Nutting, Investors Business Daily



WASHINGTON (MarketWatch) -- Inventories of unsold new homes grew to a 31-year high in December as sales were disappointingly flat after a big drop off in November, according to U.S. Commerce Department data released Monday.

New home sales increased 0.1 percent to a seasonally adjusted annual rate of 1.098 million units in December from a downwardly revised 1.097 million in November, originally reported as 1.126 million. Sales had peaked at 1.263 million in October. Read the full release.

The inventory of unsold homes on the market increased by 2.6 percent to 432,000, the highest level since August 1973. The inventory represents a 4.8-month supply at current sales rates, the highest since July 2000.

Economists were expecting a bounce back in sales to about 1.18 million in December, according to a survey conducted by MarketWatch. See Economic Calendar.

In all of 2004, a record 1.183 million new homes were sold, up 8.9 percent from 2003's 1.086 million. It's the fourth year in a row for record new home sales.

The median price of a new home increased 13.2 percent year-over-year to $222,000 in December. For all of 2004, the median price increased 12.2 percent to $218.900.

Most economists expect housing to slow, but not collapse, as the Federal Reserve continues to raise short-term interest rates at a measured pace. Despite five increases in the federal funds rate during the year, however, average mortgage rates have been steady.

The regional picture was mixed in December, suggesting that weather may have been a factor in sales. While sales in the Midwest jumped by more than 50 percent, sales declined about 16 percent in both the Northeast and South. Sales increased about 6 percent in the West.

The government cautions that its housing data are particularly prone to sampling and other statistical errors. It can take six months to establish a new trend in home sales. In December, the six-month average sales rate was 1.154 million, down from 1.170 million in November.

In a separate report, the government said personal incomes surged by a record 3.7 percent in December. Excluding the $32 billion dividend payment from Microsoft, incomes rose about 0.6 percent. Real consumer spending increased 0.9 percent. See full story.

In another report, the Chicago purchasing managers index rose to 62.4 percent in January from 61.9 percent in December, ahead of expectations.

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