Instant View: New-home sales surprisingly down in Dec

NEW YORK (BestGrowthStock) – Sales of newly built U.S. single-family homes fell unexpectedly in December, the latest indication that the government-led housing recovery might be losing some steam.

KEY POINTS: * The Commerce Department said sales fell 7.6 percent to a 342,000 unit annual rate from an upwardly revised 370,000 units in November. It was the second straight month that new home sales declined. * Analysts polled by Reuters had expected new home sales to increase to a 370,000 unit annual pace from November’s previously reported 355,000 units. * New home sales for the whole of 2009 fell 22.9 percent to a record low 374,000 units, the department said. * Despite the slump in sales there were a few bright spots in Wednesday’s report. The median sale price for a new home rose 5.2 percent last month from November to $221,300, the highest in seven months and the biggest rise since April 2009. Compared to December 2008, the median sale price fell 3.6 percent.

COMMENTS:

MICHELLE MEYER, ECONOMIST, BARCLAYS CAPITAL, NEW YORK, NEW

YORK:

“This is a very disappointing report. We have returned to lowest since March and slightly above January. It appears from today’s report that demand for new construction remains quite weak. But since the tax credit has been extended it is likely that sales will pick up this spring, but we will most probably remain at relatively low levels, in part due to competition from foreclosures.

“New home sales should stay suppressed for most of this year and into next year and we will not return to the prior peak for some time, if at all, because of the large foreclosure pipeline and the challenging credit environment. Home sales will have to pick to see a further increase in home construction. At this point we need to see how the next several months as the monthly data tends to be volatile. But, as of right now home sales have been very disappointing.”

JOHN CANALLY, ECONOMIST, LPL FINANCIAL, BOSTON:

“This was again related to the potential ending of the home buyer tax credit and then they put it back on, so that caused a lot of uncertainty.

“I still think that that’s going to flow through the data in new and existing home sales in December and a little bit in January. If you don’t start seeing a rebound by February in these home sales then I would start to get concerned.

“Home prices here are a better indication of what’s going on in the housing market than the home sales. It’s by no means taking off and going off to the races.

“Typically housing is one of the sectors that can help to lead the economy out of recession. This time we’re just going to have to be satisfied with housing hanging in there.”

JAMES COMBIAS, HEAD OF GOVERNMENT BOND TRADING, MIZUHO

SECURITIES USA:

“The home sales threw a little bit more fuel on the fire, but there’s a lot more going on for the (Treasury) market to be concerned about in the next few days.

“The real issues in the market are, what’s going on with Greece, what the Fed is going to say later today, also they’re scared about Obama’s speech tonight and the attacks on the banks, and so on.”

“There’s been a decent bid (in Treasuries) because people are just unsure and nervous.”

BULENT BAYGUN, HEAD OF U.S. INTEREST RATE STRATEGY, BNP

PARIBAS, NEW YORK:

“It is obviously much weaker than expected. This is going to add more fuel to the fire. We’ve been rallying in Treasuries since the session started. Part of the reason was the weakness in Greek bonds. To the extent that we see further weakness in the U.S. economy also, a la the housing market, it’s just going to keep the momentum intact.

“The only thing that could likely halt that is the five-year Treasury auction later today. Heading into the auction there could be some kind of concession building in the market, which means that the five-year Treasury could stop rallying.”

DAN COOK, SENIOR MARKET ANALYST, IG MARKETS, CHICAGO:

“This isn’t good news, and it comes after the disappointing existing home sales data we saw a few days ago. It should put some pressure on the market, especially coming after the disappointing outlooks we saw. However, I don’t think anyone is making too much of a commitment right now ahead of the Fed meeting and Obama’s speech.”

GARY THAYER, CHIEF MACROSTRATEGIST, WELLS FARGO ADVISORS, ST.

LOUIS MISSOURI:

“The new home sales market has been much weaker than existing homes all along and while the revisions to November suggest sales in November were not as weak as originally reported, there were even fewer sales in December.

“It shows the new home market is still very depressed. Builders are not constructing new homes and not cutting prices as much because there is not an oversupply of new homes on the market. Homebuilder sentiment is still really depressed.

“New homes did not feel the benefit of the government’s first-time home buyer tax credit program and that probably means new home construction will probably stay weak until the economy starts to grow at a more sustainable rate.”

MARKET REACTION: STOCKS: U.S. stock indexes edged lower. BONDS: U.S. Treasury debt prices rose slightly. DOLLAR: U.S. dollar weakened against the yen.

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Instant View: New-home sales surprisingly down in Dec