Few Buyers For New Homes

Maybe it's the unusually cold weather, or maybe potential buyers are waiting till springtime, but few people bought new houses last December.

Purchases of new single-family homes fell to an annualized rate of 342,000 in December, according to the Commerce Dept. That's down from 355,000 the month before and it's close to the low point for home sales last January of 329,000. And of course, it's just a third of the million or more new homes that sold every year from 2003 through 2006.

Housing watchers were expecting much better. Survey estimates ranged from 340,000 to 399,000. Bloomberg News put its bet at 366,000.

So what happened? People shopping for homes may figure it makes sense to wait a few months to buy.The $8,000 federal home buyer tax credit doesn't expire until April 30. However, a growing body of experts are expecting home prices to hold steady or drop slightly between now and then. Freddie Mac predicts the closely-watched S&P Case Shiller Home Price Index will fall 3 percent in 2010, with most of the damage in the first quarter.

People shopping for homes that didn't buy before the tax credit was originally scheduled to expire in November might now be waiting out the winter months - which have been colder than usual - in hopes of getting a better deal this spring. Economists are hoping for another surge in sales before the tax credit expires.

The question is how many potential buyers are left in the market. If enough people bid on homes this spring, demand could come into a healthy balance with the supply. That's largely because the inventory of new homes has continued to drop as builders cut back. The number of homes for sale fell to a seasonally adjusted 231,000 in December, the fewest since April 1971.

At the current rate of sales, that's about an eight-month supply. But if the rate of sales rises past 400,000, as it did for several months last year,it's close to a healthy six-month supply of homes.

Meanwhile, one of the sector's most reliable leading indicators, building permits, have risen for two straight months, including a 10.9% surge in December, and are up about 15% from a year ago, according to a piece in the Wall Street Journal.

New One-Family Houses Sold, annually
1999 - 880,000
2000 - 877,000
2001 - 908,000
2002 - 973,000
2003 - 1,086,000
2004 - 1,203,000
2005 - 1,283,000
2006 - 1,051,000
2007 - 776,000
2008 - 485,000
2009 - 374,000

New One-Family Houses Sold, monthly
seasonally-adjusted annual rate
Nov 2008 - 390,000
Dec 2008 - 374,000
Jan 2009 - 329,000
Feb 2009 - 354,000
Mar 2009 - 332,000
Apr 2009 - 345,000
May 2009 - 371,000
Jun 2009 - 399,000
Jul 2009 - 419,000
Aug 2009 - 408,000
Sep 2009 - 393,000
Oct 2009 - 400,000
Nov 2009 - 355,000
Dec 2009 - 342,000
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