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Despite January dip, new home sales look promising

WASHINGTON — Sales of new homes dipped in January, the government said Friday, while also saying the final quarter of 2011 was stronger than first estimated.

The Commerce Department said new home sales fell 0.9 percent last month to a seasonally adjusted annual rate of 321,000 homes. That followed four straight months of gains in which home sales rose 10 percent.

The gains came after the government upwardly revised October, November and December's figures. December's annual sales pace of 324,000 was the highest in a year.

Even with more sales, just 304,000 new homes were sold in 2011 — the fewest on records dating back to 1963. And new homes are selling well below the 700,000-per-year rate that economists equate with a healthy market.

Still, Pierre Ellis, an economist at Decision Economics, said the improvement in 2011's fourth quarter lends "additional support to the housing market," and mirrors other positive signs in the industry.

Builders are growing more optimistic after seeing more people express interest in buying this year. They've also sought more permits to build single-family homes — one of several encouraging signs across the housing industry.

And sales prices for new homes are rising. The median sales price of a new home rose 0.3 percent in January to $217,100.

In January, sales of previously occupied homes reached their highest level in nearly two years. And they have risen more than 13 percent in the past six months.

Most important, hiring has improved, which is critical to a housing rebound. The economy added more than 200,000 net jobs in both December and January. And economists anticipate another big month of hiring in February after seeing unemployment benefit applications fall to the lowest level in nearly four years.

Though new-home sales represent less than 10 percent of the housing market, they have an outsized impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.

Despite January dip, new home sales look promising 02/24/12 [Last modified: Friday, February 24, 2012 9:40pm]
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