US new home sales tick higher in December

Sales of new US single-family homes edged up in December, according to data from the Commerce Department.

New home sales were up 3.7% to a seasonally-adjusted annual rate of 621,000 from a revised rate of 599,000 in November. Analysts had pencilled in a rate of 600,000. On the year, sales were down 2.4%.

Meanwhile, the median price of a new home was $318,600, up from $303,500 in November.

The figures also showed that the seasonally-adjusted estimate of new houses for sale at the end of December was 344,000. This represents a supply of 6.6 months at the current sales rate.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the huge downward revision to November sales, initially estimated at 657,000, serves as a reminder not to take the monthly new home sales numbers very seriously. He pointed out that the margin of error is typically well above +/-10%.

"Still, the big picture here is that sales are recovering from the 549K low in October, when activity likely was depressed by Hurricane Michael. The increase in mortgage applications last fall is starting to work through the numbers, and we expect further increases in sales - with an even-money chance of new cycle highs - in the spring.

"New home sales are doing much better than existing home sales because most new sales are outside the northeast, where the state and local tax deduction limits have caused havoc. Rising new home sales trigger increased construction activity, so we think the residential investment component of GDP will rebound by the second quarter at the latest. "