U.S. New Home Sales Largest Decline In 1.5 years

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decline in home sales

In December the sales of U.S. single-family homes recorded their biggest drop in nearly 1-1/2 years. The fall was much greater than expected, and replacement of flood-damaged houses in parts of the South affected by hurricanes faded.

New home sales have declined according to The Commerce Department, and it was the largest decline since August 2016. Last month, sales declined 9.3 percent to a seasonally adjusted annual rate of 625,000 units.

Sales pace in the past reported 733,000 units, and November’s sales pace had been revised down to 689,000 units. Since July 2007, this is still the strongest performance.
Economists polled forecasts for new home sales, and this accounted for 10.1 percent of the housing market. Last month, this fell to 7.9 percent to a pace of 679,000 units. It can also be assumed that the unseasonably cold temperatures in December also hurt sales.

New home sales are drawn from permits, and are volatile on a month-to-month basis. Due to the amid reconstruction efforts following the desales jumped 6.6 percent vastation caused by hurricanes Harvey and Irma, and then proceeded to drop 9.8 percent in South. In the Midwest, sales fell 10 percent last month.

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New home sales increased suddenly 14.1 percent since last year. In 2017, sales increased 8.3 percent to 608,000 units. A strong labor market means the economy is near full employment, but there hasn’t been an increase in supply of housing to supplement the increased demand for housing.


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Therefore, house price inflation has outrun wage growth, and this subsequently pricing some first-time home buyers out of the market. A report revealed that inventory of houses has dropped to a record low. Last month, previously owned homes declined 3.6 percent to a seasonally adjusted annual rate of 5.57 million units.

295,000 new homes entered the market in December, and there was an increase of 3.9 percent. This being the highest level since April of 2009. During the housing market bubble, the stock of new home sales continues to remain well below its peak. It would take 5.7 months to clear the supply of houses on the market working at December’s sales pace. This is up from 4.9 months in November. A six-month supply can be seen as a healthy balance between supply and demand.

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