New home purchases in the US fell more than expected in December, according to the Commerce Department. Sales fell seven percent to a 414K annualized rate, short of the 457K general consensus. November’s data was revised down 464K to 445K at an annualized rate. Demand for new homes increased by 16.4 percent, but sharp increases in mortgage rates and home affordability priced new home buyers out during the last six months of 2013.
With having the best year in housing since 2008’s property bubble, many home builders still remain optimistic but realize how quick affordability has declined. Once again, weather is at the forefront. “You have some weather effects that can really whip the numbers around from month to month,” said Scott Brown, chief economist at Raymond James & Associates. Brown said that rates will begin to rise further, which would give the impression the economy is getting stronger. However, if they rise too high, too quickly, there could be a problem.
Another hit to housing’s momentum is the slow down in construction as housing starts drop 9.8 percent last month. This comes only a few months after construction seen the most bullish activity prior to the real estate meltdown. November’s 1.11 million annualized housing start pace was the highest since 2007. However, December’s print closed 2013 at 999K annualized. Work on single-family homes declined seven percent from 717K to 667K in December.