WASHINGTON (Reuters) — Sales of new
U.S. single-family homes fell more than expected in December, but
lean inventories and steady price gains suggested the housing market
recovery remained intact.
Economists largely shrugged off the second straight month of decline
in sales, blaming frigid temperatures. Other data on Monday showed
an acceleration in services sector growth in January, backing views
of sustainable strength in the economy.
"It's cold out there for the economy. The drop in new home sales is
not a sign the economy at large is starting to slow in a worrisome
manner," said Chris Rupkey, chief financial economist at Bank of
Tokyo-Mitsubishi UFJ in New York.
The Commerce Department said new home sales fell 7.0 percent to a
seasonally adjusted annual rate of 414,000 units. Sales were at a
445,000-unit pace in November and economists had expected them to
slow to only a 457,000-unit rate in December.
Apart from the bitterly cold weather, last month's decline in sales
was likely a continuation of the payback after October's outsized
14.9 percent increase. Sales in the Northeast, which was hard hit by
cold temperatures, tumbled 36.4 percent to their slowest pace since
June 2012.
Home sales are traditionally weak during the winter, but a cold snap
last month could have exaggerated the magnitude of the slowdown. New
home sales stumbled in the summer in the aftermath of a spike in
mortgage rates, but economists said a lack of supply could also be
curbing activity.
"There has been some pause in sales, some of that may be
supply-related rather than demand-related," said Samuel Coffin an
economist at UBS in New York. "If you look at the inventory data for
new and existing homes, they don't look consistent with a big
fall-off in demand."
Last month, the supply of houses on the market fell 2.8 percent to
171,000 units. That was the lowest since July.
At December's sales pace it would take five months to clear the
supply of houses on the market. That was up from 4.7 months in
November. A supply of six months is normally considered a healthy
balance between supply and demand.
Housing is expected to have contributed significantly to economic
growth last year, through residential investment and rising home
prices that have boosted the net worth of households, allowing for
greater discretionary spending.
PRIVATE SECTOR ACCELERATES
For the fourth-quarter, however, the contribution likely moderated a
bit from the July-September period.
The soft home sales pace combined with emerging markets worries to
push U.S. stocks down on Monday. The dollar was little changed
against a basket of currencies, while prices for U.S. Treasuries
pared earlier losses.
Separately, financial data firm Markit said its January "flash" or
preliminary services sector gauge rose to a four-month high of 56.6
from 55.7 last month. A reading above 50 signals expansion in
economic activity.
"U.S. service providers reported a busy January, providing an
important signal that the economy remains in good health at the
start of the year," said Markit chief economist Chris Williamson.
"Growth of business activity picked up from the already robust pace
seen in December, and optimism about prospects for the year ahead
rose to one of the highest levels we've seen since the financial
crisis."
The solid Markit reading feeds into expectations for stronger
economic growth this year. That has economists confident that the
housing market will regain some lost ground, even in the face of
higher mortgage rates.
"We expect new home sales activity should pick up in the coming year
along with improving economic growth," said Mark Vitner, a senior
economist at Wells Fargo Securities in Charlotte, North Carolina.
For all of 2013, a total of 428,000 new single family homes were
sold. That was the most since 2008 and represented a 16.4 percent
increase from 2012.
The median price of a new home last month rose 4.6 percent from
December 2012. For the year as a whole, prices were up 8.4 percent,
the most since 2005, with the median new home price climbing to
$265,800, the highest on record.
(Reporting by Lucia Mutikani; editing by
Paul Simao)
