December New Home Sales

Updated 26-Jan-07 10:46 ET

About this release

Highlights

December new home sales 1.120 mln (4.8%).

Key Factors

Follows a strong upward revision in November to a 7.4% gain. December stands 14% above the July low.
Building stability appears more like a modest rebound in late 2006. Warm weather may have helped.
December gain is the fourth over the last five months.
Leaves a -11% decline from a year ago, -18% from July 2005 peak.
Unsold inventories fell to 5.9 months from a 7.2 mo high in July.
Median prices show a -1.5% decline from a year ago, lightening decline from -2.4% yoy in Nov and -5.7% yoy in Sep.

Big Picture

New home sales fell a sharp -28% from the peak in July 2005 to the recent bottom in July 2006. But by year end the level was 14% higher than the July low arguing that the worst is now past. Gains over four of the last five months reflect a modest rebound given lower fixed term mortgage rates, lower prices and a buyers market. Prices are lower than a year ago but prices will improve as unsold inventories are thinned. Inventories reached a record 7.2 months (573K) in July and fell off to 5.9 months in December. Strong speculative buying in some locations leave a stronger risk of larger price declines (in those specific locations) as the trend in national and regional prices will be modest compared to the size of the increase over the prior few years.

Category	Dec	Nov	Oct	Sep	Aug
Total Sales	1120K	1069	995	1022	1021
Northeast	84	66	40	62	85
Midwest	200	158	142	140	154
South	597	595	567	565	568
West	239	250	246	255	214
Inventory (months)	5.9 mo	6.1	7.0	6.7	6.8
Median Price Y/Y	-1.5%	-2.4	0.3	-5.7	1.6

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Release Details

New Home Sales

Importance (A-F): This release merits a C+.
Source: The Census Bureau of the Department of Commerce.
Release Time: 10:00 ET around the last business day of the month (data for month prior).
Raw Data Available At: http://www.census.gov/const/newressales.pdf .

The report indicates the level of new privately owned one-family houses sold and for sale. New home sales usually have a lagged reaction to changing mortgage rates. They also tend to be stronger early in the business cycle when pent-up demand is strong, and they fade later in the cycle as the demand for housing is sated. In addition to home sales, the market monitors the number of homes for sale relative to the current sales pace. As this inventory measure falls (rises), housing starts tend to rise (fall). Finally, the median home price provides an indication of inflation in the housing sector, though only year/year changes provide any meaningful information.

The home sales report is quite volatile and subject to huge revisions, making any one month's reading very unreliable. The report rarely prompts a market reaction. The market prefers the existing home sales report, which has a sample data pool four times as large and is released earlier in the month.