The Housing Recovery Continues Despite a Drop in New Home Sales

Monthly data out this morning show sales of new homes fell 7 percent in December, to an annualized rate of 414,000, which was below the estimates of all 75 economists surveyed by Bloomberg News. Sales are up 35 percent since the bottom of the market in 2011, but as Calculated Risk notes, they are still basically at or below the levels seen during the bottom of every previous recession.
New homes sales are just one piece of the market. And as Trulia’s Jed Kolko points out on Twitter, they’re a historically small piece right now.

More broadly, there are signs of “remarkable resilience” in the recovery, according to a Campbell/Inside Mortgage Finance HousingPulse Tracking Survey released last week. It found that nondistressed homes spent an average of 9.7 weeks on the market in December, or 20 percent less time than in December 2012. Also, homes are selling closer to their asking prices. In December, homes sold for 97.1 percent of their list prices, on average, up from 95.5 percent a year earlier.

Zillow found that there was a “widening slowdown” in price appreciation toward the end of 2013, a year in which prices increased 6.4 percent from the previous December. It calculated that 83 percent of metro areas saw smaller price increases in December than in November and that in seven of the top 35 metro areas, home prices declined in December. Zillow expects that in 2014, the market will stay in what it calls the “middle innings” of the recovery: Prices will continue to cool a bit but still rise an estimated 4.8 percent.

Zillow and others say that one reason prices may slow some is that more inventory could hit the market. Rising prices make selling more attractive, particularly for homeowners who had owed more on their mortgage than their homes were worth and are now back above water. Builders say they’re confident, and in November, new home starts jumped 22.7 percent, to an annualized rate of 1.09 million annualized rate—a five-year high. New starts ended the year just slightly lower in December. We’ll know more about the strength of the recovery once those homes are built and hit the market.

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