New US home sales rose in December, but fell heavily in 2006
Posted: 27 January 2007 0147 hrs

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WASHINGTON : Sales of new US homes rose by more-than-expected in December, but over 2006 fell by the biggest margin in 16 years.

The Commerce Department said new home sales rose 4.8 percent in December to an annualized clip of 1.120 million, defying most economists who had expected sales to increase to just 1.050 million homes.

However, the government report also showed that sales of newly built homes slumped 17.3 percent in 2006 to 1.061 million homes compared with the prior year's sales pace.

The annual downturn marked the worst decline in sales since 1990.

While analysts welcomed the December sales increase, they cautioned that warmer-than-usual winter temperatures last month may have encouraged more buyers to tour and purchase a new home.

"As with housing starts, good weather last month likely played a role in December's strong new home sales as they are booked at signing," Wachovia economists said in a briefing note.

Other economists said builders' incentives had also helped propel sales higher.

The US housing market entered an abrupt downturn last year following several years of sizzling growth which unleashed a speculative frenzy in some markets, including Las Vegas and Florida where buyers would form lines along a street as new homes were put up for sale.

The Commerce Department report came fast on the heels of a report Thursday by the National Association of Realtors which revealed that sales of existing homes fell 0.8 percent last month to a worse-than-expected seasonally-adjusted 6.22 million properties.

Despite the overall drop in sales last year, the government said that the median price of a new home actually rose slightly to 245,300 dollars compared with 240,900 dollars in 2005.

"While the back-to-back gains in new home sales are a positive development, it may be too early to conclude that the housing market has decisively turned the corner," observed Brian Bethune, an economist at Global Insight.

"Builders are still complaining about very high cancellation rates, indicating that final demand for new homes is much less robust than the headline numbers would suggest," Bethune cautioned.

There were an estimated 537,000 new homes up for sale at the end of December, down 0.9 percent from November, and representing a supply of 5.9 months at the current sales pace.

The government revised up its estimate for November sales to 1.069 million from an initial forecast of 1.047 million.

- AFP /ls