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Economy in Brief

New Home Sales Fall 16.6% in January, Pay Back Late 2006 Gains
by Carol Stone February 28, 2007

A month ago here, Tom Moeller explained that mild weather was likely behind an unexpectedly strong performance for new home sales. They were up 4.8% from November, which itself had risen markedly. All of that has now been reversed as sales in January dropped 16.6% to 937,000 from a modestly revised December total of 1.123M. The January figure is the lowest since 936,000 in February 2003, nearly four years ago. Some change in the weather was probably responsible for this latest move too, as the national average of heating degree days rose from a very low number in December to a near-average number for January.

January sales were down sharply in every region: in the Northeast, they fell 18.7% (but just 1.6% y/y). In the Midwest, they were off 8.1% and actually maintained a slim gain of 0.6% y/y. Sales in the South fell 9.7% in the month and were down 11.2% from the year earlier. Finally, as with existing home sales, the greatest weakness is in the West. New home sales there slid 37.4% in January to just 166,000, down 50.4% from January 2006 and the lowest since March 1995.

The decline in total sales brought to an end a string of reductions in the inventory of unsold homes, four in a row and five of the last six months. The change was not great, just 540,000 at end-January from 539,000 at end-December, but the drop in sales volume meant that the months' supply at current volume jumped from 5.7 to 6.8, a large one-month increase.

The median new home price rose 0.2% from December to $239,800 (-2.1% from January 2006). There were noticeable upward revisions to prior months, however, including nearly $10,000 in November. The year 2006 now shows a 3.7% rise, not strong, surely, but also not nearly as weak as previously calculated.All the data discussed here are contained in Haver's USECON database, the home sales under "Housing and Construction" and the heating-degree days under "Other Statistics", which also includes monthly average temperatures and inches of precipitation.

US New Homes Jan 2007 Dec 2006 M/M Y/Y 2006 2005 2004
Total Sales (SAAR, 000s) 937 1,123 -16.6% -21.3% 1,070 1,280 1,201
Median Price (NSA, $) 239,800 239,400 -0.2% -2.1% 241,125 234,208 217,817
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