Purchases (NHSLTOT) of single-family properties decreased 2.2 percent to a 307,000 annual pace, figures from the Commerce Department showed today in Washington. The median forecast in a Bloomberg News survey of economists called for a rate of 321,000 home sales. Last year marked the worst year for the industry in records going back to 1963.
The threat of further price declines may be dissuading some Americans from buying a new home even with mortgage rates near all-time lows and more people finding work. Following a lull in 2011, a wave of foreclosures may hamper the recovery in real estate as more distressed properties are put on the market.
“Builders continue to contend with a number of existing homes that are deeply discounted,” said Anika Khan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We’re expecting a bit of a pickup in 2012, but we won’t see a meaningful increase as long as new homes are competing with those existing homes.”
Today’s figures underscore the Federal Reserve’s view that the housing market is holding back the U.S. expansion. In 2011, builders sold 302,000 homes, down 6.2 percent from 2010. Sales in the Northeast and West were also the lowest on record, while purchases in the South were the weakest since 1966.
Stocks pared gains after the figures. The Standard & Poor’s 500 Index rose 0.3 percent to 1,329.48 at 10:14 a.m. in New York after climbing as much as 0.6 percent earlier. The yield on the benchmark 10-year Treasury note fell to 1.95 percent from 2 percent late yesterday.
Projections from the 75 economists in the Bloomberg survey ranged from 309,000 to 350,000. The government revised November sales to a 314,000 rate from a previously reported 315,000.
The December decrease in new-home purchases was led by a 10.1 percent drop in the South, the biggest decline since May 2010. Sales also fell in the Midwest. Demand increased 46.7 percent in the Northeast, a rebound from the 16.7 percent decrease the previous month.
The median price of a new house purchased last month declined 12.8 percent, the biggest drop since February 2009, from December 2010 to $210,300, today’s report showed.
The supply of homes at the current sales rate increased to 6.1 months’ worth from 6 months in November. There were 157,000 new houses on the market at the end of last month, the fewest on record.
Home sales and construction will improve in 2012, contributing “modestly” to economic expansion after acting as a drag on growth since 2006, according to a Fannie Mae forecast earlier this month. Sales of new and existing homes are likely to increase 3.5 percent and housing starts are projected to rise 16 percent, the group’s chief economist said Jan. 13.
Builders are becoming more optimistic. The National Association of Home Builders/Wells Fargo sentiment index rose this month to the highest level since June 2007 as sales and buyer traffic improved. Last month, they broke ground on 470,000 single-family houses at an annual rate, the most since April 2010, Commerce Department figures show.
“The economy is beginning to firm up,” Douglas Yearley Jr., chief executive officer of Toll Brothers Inc. (TOL), said in a Jan. 11 interview with Bloomberg Television. “We see more people coming out to buy. Affordability has never been better.”
A sustained decline in the number of existing homes for sale will also support new construction. The number of properties on the market in December dropped to 2.38 million, the fewest since March 2005, the National Association of Realtors said last week. At the current sales pace, it would take 6.2 months to sell those houses, down from 7.2 months at the end of November. A range of seven months to eight months supply is consistent with stable home prices, the group has said.
There is a chance that inventory could rise, hindering more progress for new home sales. Banks may seize more than 1 million U.S. homes in 2012 after legal scrutiny of foreclosure practices slowed actions against delinquent property owners in 2011, RealtyTrac Inc., an Irving, California-based data seller, said Jan. 12.