WASHINGTON -- Sales of new U.S. single-family homes fell more than expected in December, but lean inventories and steady price gains suggested sufficient strength in the housing market to support the economy.
Other data released Monday showed that the private sector maintained its growth pace in January.
The Commerce Department said new home sales fell 7 percent to a seasonally adjusted annual rate of 414,000 units. Sales were at a 445,000-unit pace in November.
Economists polled by Reuters had expected sales, which are measured when contracts are signed, to slow to a 457,000-unit pace in December.
The second straight month of declines in sales was likely payback after October's outsized 14.9 percent increase and may have reflected some drag from cold weather that blanketed most parts of the country last month.
Sales in the Northeast, which was hard hit by frigid temperatures, tumbled 36.4 percent to their slowest pace since June 2012. Home sales are traditionally weak during the winter, and last month's cold snap could have exaggerated the magnitude of the slowdown.
Though new home sales stumbled in the summer in the aftermath of a spike in mortgage rates, %VIRTUAL-article-sponsoredlinks%they have largely weathered the higher home loan costs against the backdrop of tight inventories and improving labor market conditions.
Housing is expected to have contributed significantly to economic growth last year, through residential investment and rising home prices that have boosted the net worth of households, allowing for greater discretionary spending.
U.S. Treasuries prices pared earlier losses and stocks were trading lower after the data.
Separately, financial data firm Markit said its January "flash" or preliminary services sector PMI rose to 56.6 from 55.7 last month. It was the strongest reading since last September's 57.7.
A reading above 50 signals expansion in economic activity.
"U.S. service providers reported a busy January, providing an important signal that the economy remains in good health at the start of the year," said Markit chief economist Chris Williamson.
For all of 2013, a total of 428,000 single family homes were sold. That was the most since 2008 and represented a 16.4 percent increase from the 2012.
Last month, the supply of houses on the market fell 2.8 percent to 171,000 units. That was the lowest since July.
The median price of a new home last month rose 4.6 percent from December 2012. New home prices rose 8.4 percent in 2013, the largest increase since 2005.
For all of 2013, the median new home price was $265,800, the highest on record.
At December's sales pace it would take 5 months to clear the supply of houses on the market. That was up from 4.7 months in November. A supply of 6 months is normally considered a healthy balance between supply and demand.
9 Numbers That'll Tell You How the Economy's Really Doing
New Home Sales Not So Merry in December
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.