New US home sales drop 7 percent, miss estimates

December new homes sales drop 7%
December new homes sales drop 7%

Sales of new U.S. single-family homes fell more than expected in December, but lean inventories and steady price gains suggested sufficient strength in the housing market to support the economy.

The Commerce Department said on Monday sales fell 7.0 percent to a seasonally adjusted annual rate of 414,000 units. November's sales were revised to a 445,000-unit pace from the previously reported 464,000-unit rate.

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Economists polled by Reuters had expected new home sales, which are measured when contracts are signed, to slow to a 457,000-unit pace in December.

The second straight month of declines in sales was likely payback after October's outsized 14.9 percent increase and may have reflected some drag from cold weather that blanketed most parts of the country last month.

Prospective home buyer, left, looks at the refrigerators of a new home for sale while speaking with a realtor in Denver, Colorado.
Matthew Staver | Bloomberg | Getty Images

Sales in the Northeast, which was hard hit by frigid temperatures, tumbled 36.4 percent to their slowest pace since June 2012. Home sales are traditionally weak during the winter, and last month's cold snap could have exaggerated the magnitude of the slowdown.

New home sales were up 4.5 percent, compared with December 2012. For all of 2013, a total of 428,000 single family homes were sold. That was the most since 2008 and represented a 16.4 percent increase from the 2012.

Last month, the supply of houses on the market fell 2.8 percent to 171,000 units. That was the lowest since July.

The median price of a new home last month rose 4.6 percent from December 2012. New home prices rose 8.4 percent in 2013, the largest increase since 2005.

For all of 2013, the median new home price was $265,800, the highest on record.

At December's sales pace it would take 5.0 months to clear the supply of houses on the market. That was up from 4.7 months in November. A supply of 6.0 months is normally considered a healthy balance between supply and demand.