WASHINGTON – New-home sales in the U.S. lost steam in December but wrapped up a solid year in a segment of the housing market that has faced tight inventory and fast-rising prices.
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Purchases of newly built single-family homes -- a relatively narrow slice of all U.S. home sales -- decreased 9.3% to a seasonally adjusted annual rate of 625,000 in December, the Commerce Department said Thursday, a sharper fall than economists surveyed by The Wall Street Journal had expected.
Economists say a post-hurricane bounceback in sales drove strong activity through the fall, and some of the December pullback could mark a reversal from those gains.
Sales rose 8.3% in 2017 from the prior year to 608,000, the highest level since 2007. This offers positive momentum for the market heading into 2018.
"We do expect new home sales to pick up over the next year," said Aaron Terrazas, senior economist at Zillow. "Home builders do sense that there is demand out there particularly at more affordable price points and are doing what they can to try to meet that demand."
Despite solid growth in sales in 2017, sales still remain well below the elevated levels seen before the 2007-09 financial crisis and recession.
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In the wider housing market, inventory has been tight recently -- in part because of lackluster home construction -- and that has contributed to a run-up in home prices.
The median sale price for a new home sold in December was $335,400. At the current sales pace, there was a 5.7-month supply of new homes on the market at the end of December. Though the December figure was up from 4.9 in November, supply remains tight.
Prospective Charlotte home buyer Krishan Intwala, 32 years old, recently shifted focus from looking at updated resale homes to looking at new homes, recognizing the higher price of new homes makes it tough.
"As much as we like (new homes) it's hard to swallow getting a smaller house, a smaller yard, a smaller lot of land," Mr. Intwala said.
Sales of previously owned homes, which represent the bulk of the U.S. market, fell in December but rose in 2017 as a whole to their highest level since 2006, the National Association of Realtors said Wednesday.
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(END) Dow Jones Newswires
January 25, 2018 12:50 ET (17:50 GMT)