New Home Sales Drop in December, Cap Off Dismal End to 2011

Sales of new homes in the United States declined in December, a fresh sign of distress in the collapsed housing market, official data showed Thursday.

According to statistics compiled by the US Department of Commerce, new home purchases decreased 2.2 percent to a seasonally adjusted 307,000-unit annual rate. That’s less than the 323,000 sold in 2010, making 2011 the worst year on records dating back to 1963.

While existing home sales have been rising and construction of new homes has gained ground, both signs suggesting the depressed housing market is starting to recover, economists say the pace of new home sales is still far below the 700,000 rate that needs to happen before the housing market really begins to pick up.

Anika Khan, an economist at Wells Fargo in NC stated that one major reason for the dismal 2011 sales is that builders must compete with foreclosures and short sales — when lenders accept less for a house than what is owed on the mortgage.

“Builders continue to contend with a number of existing homes that are deeply discounted,” Kahn told Bloomberg. “We’re expecting a bit of a pickup in 2012, but we won’t see a meaningful increase as long as new homes are competing with those existing homes.”

Kahn added that despite the drop in new home sales, there was a glimmer of good news in the department’s report – the prices of houses rose.

The average sales price of new homes was $266,000 in December, up from $250,300 in November.

Real estate reports released this week suggest that the housing market could improve in 2012, due to a combination of factors such as improved unemployment figures and low mortgage interest rates.

Freddie Mac’s U.S. Economic and Housing Market Outlook survey, released Wednesday, says that sales are expected to increase from 2 to 5 percent year-over-year.

Via Bloomberg
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