FXstreet.com (Barcelona) - Sales of new houses have decreased in December for the second consecutive time, and the decrease has been sharply larger then expected, with sales hardly above half the reading of December 2006, the lowest sales volume in 13 years, according to data released by the Commerce Department.
Sales of single family homes fell 4.7% in December to an annual rate of 604.000 units, from November's 634.000 annual rate, revised down from the initially released 647.000 annual rate. December's figures are sharply weaker than expected, the market consensus was around a 645.000 annual rate.
On the year, sales of new houses have fallen 40.7% from December 2006 estimate of 1,019,000 units. On the whole 2007 sales of new houses have been estimated 774,000, 26.4 % below the 2006 figure of 1,051,000 units.
Sales are now, according to Ian Shepherdson, Chief U.S. Economist at High Frequency Economics, Ltd at the lowest point in 13 years with no sign of recovery ahead: Sales are now at their lowest point in nearly 13 years and are down 40.7% y/y. There is no sign yet of an end to the decline in activity and prices are collapsing, down 10.4% y/y. Inventory continues to rise, now at 9.6 months, yet another cycle high and two-and-a-half times the level prevailing during the boom years.
The main consequence now, according to Shepherdson is the decline in construction activity: Homebuilders are cutting production but with sales still collapsing they have to run to stand still. Yet the stock market apparently believes the worst is over; S&P 500 homebuilders rose 28% last week, its best week ever. We think the downside for activity and prices remains considerable. To repeat, there is no sign of a bottom in any of these data.