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December Rise in Home Sales Bodes Well for 2007 Upturn
Heading into 2007, housing demand showed further signs of stabilizing, with sales of new single-family homes rising 4.8% to a seasonally adjusted annual rate of 1.12 million units in December, according to figures released on Jan. 26 by the U.S. Commerce Department.
"The December housing report squares with our most recent builder surveys, which show that traffic of prospective buyers is up and consumers are responding favorably to price adjustments and widespread sales incentives," said NAHB President David Pressly.
On an annual basis, 1.061 million new home sales were registered in 2006. While this represents a 17.3% drop from an all-time high in 2005, the sharpest percentage decline since 1990, the actual sales level was about the same as in 2003, just as the industry was entering into the unsustainable boom of 2004 and 2005.
On a quarterly basis, new home sales posted a rate of 1.061 million in the final quarter of 2006, up from 1.007 million in the third quarter, which was the quarterly low point for the year.
"The stabilization of home sales and housing demand that we are now seeing is the first step required to put the housing market back on track," said NAHB Chief Economist David Seiders. "The second step is to whittle down the inventory overhang, which builders have been doing since July, and the final step will be to bring housing starts back up to sustainable levels. We anticipate that starts will bottom out in the first quarter of this year and that residential construction activity will be moving up by the second half of 2007."
The inventory of new homes for sale hit a 10-month low of 537,000 units in December, which is equivalent to a 5.9-month supply at the current sales price — down from a recent high of 7.2 in July.
On a regional basis, new home sales were up 27.3% in the Northeast, 26.6% in the Midwest and were flat in the South. Sales fell 4.4% in the West.
Seiders noted that unusually warm weather probably boosted sales in the Northeast and Midwest to some extent in December, but that the stabilization pattern evident in the fourth quarter is quite convincing and consistent with other available housing indicators, including NAHB's survey measures.
 Want to Know the Long-Term Forecast Through 2015?
Find out in HousingEconomics.com’s Long-Term Forecast.
HousingEconomics.com includes downloadable Excel tables featuring the housing starts forecast, GDP, demographics and more.
To learn more, visit www.housingeconomics.com.
 NAHB Kit Gives Builders Back-to-Basics Tips in Changing Market
With the current cooling of the nation’s housing market expected to persist into the middle of next year, NAHB has developed a comprehensive online toolkit geared to providing association members with information that will help them prosper in today’s changing business environment.
To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar.
For assistance, call the NAHB Member Service Center at 800-368-5242.
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