{"id":65788,"date":"2018-01-25T18:52:00","date_gmt":"2018-01-26T00:52:00","guid":{"rendered":"http:\/\/news.medill.northwestern.edu\/chicago\/?p=65788"},"modified":"2018-01-29T18:08:14","modified_gmt":"2018-01-30T00:08:14","slug":"new-home-sales-drop-in-december","status":"publish","type":"post","link":"https:\/\/news.medill.northwestern.edu\/chicago\/new-home-sales-drop-in-december\/","title":{"rendered":"New home sales drop in December"},"content":{"rendered":"

By Sarah Foster<\/strong>
\nMedill Reports<\/em><\/p>\n

Americans purchased fewer homes than expected last month, but economists are still pointing to 2017 as a healthy year for the housing market.<\/p>\n

December sales of newly built single-family homes plunged 9.3 percent to a seasonally adjusted rate of 625,000, the sharpest decline since August 2016, according to a report released Thursday by the Department of Commerce. New home sales in November were revised from a seasonally adjusted rate of 733,000 to 689,000 but remained the strongest on record in 11 years.<\/p>\n

Despite the sharp decline, new home sales in December were still up 14.1 percent from a year ago. In the full year 2017 sales rose 8.4 percent from the previous year and have climbed 50 percent since 2012, according to the report.<\/p>\n

\"Chart:<\/p>\n

<\/p>\n

Despite the drop, jumping to negative conclusions about the housing market is problematic, as information is revised in subsequent reports, said Aaron Terrazas, senior economist at Zillow Research, the economics arm of online rental marketplace Zillow Inc.<\/p>\n

\u201cThese numbers are volatile, and they do move around a lot,\u201d Terrezas said. \u201cLooking at movement from one month to another month doesn\u2019t tell us a whole lot.\u201d<\/p>\n

Explanations, he said, could come from the longer holiday season. Because both Christmas Day and New Year\u2019s Day landed on Mondays, people often took two full weeks off work.<\/p>\n

\u201cDuring the holiday, there\u2019s not that much sales activity,\u201d he said.<\/p>\n

People often assume that colder weather impacts buying habits, but this is problematic because numbers are seasonally adjusted, said John McDonald, professor emeritus in the Department of Economics at the University of Illinois at Chicago. McDonald said he’d rather look toward mortgage interest rates, anticipated to increase in December, according to an article in The New York Times.<\/a><\/p>\n

\u201cSales are sensitive to interest rates and expectations of interest rates,\u201d McDonald said. \u201cNovember is an outlier. That increase might have been in anticipation of the Federal Reserve raising interest rates, people saying, \u2018Let\u2019s go buy our house now. Who knows what it\u2019s going to do in December?\u2019\u201d<\/p>\n

McDonald said price index is also a strong indicator of purchasing habits, but the latest release defined rates in October. This points to the fact that it\u2019s still too soon to identify housing market trends based on these month-to-month reports, McDonald said.<\/p>\n

\u201cThe demographics of the housing market don\u2019t change in 30 days,\u201d McDonald said. \u201cDecember seems to be consistent with prior months. The outlier is really November. The year showed a modest upward trend with some fluctuations around the trend.\u201d<\/p>\n

The median sales price of newly built homes in December 2017 was $335,400. The seasonally adjusted estimate of new houses for sale at the end of December was 295,000. At last month\u2019s sales rate, it would take nearly half a year for these remaining new homes to be cleared off the market. Nearly 32 percent of these homes, however, are buildings for which construction has not yet started.<\/p>\n

To Terrazas, these figures represent the broader housing market trends that he\u2019ll be watching in the year ahead.<\/p>\n

\u201cThe new housing market has been relatively slow to recover compared to the existing housing market,\u201d he said. \u201cBuilders who survived the last recession survived because they were relatively cautious and conservative, unwilling to take the crazy risks that put many of their colleagues out of business. It\u2019s important that they\u2019re selling more homes before they\u2019re finished. It reflects that risk conversion.\u201d<\/p>\n

The Department of Commerce collects statistics through sample surveys that quantify the number of permits issued to new, privately owned buildings. New home sales make up a small portion of the housing market, the majority being sales of existing homes.<\/p>\n

Existing home sales also dropped in December, by 3.6 percent to a seasonally adjusted annual rate of 5.6 million, the National Association of Realtors reported Wednesday. Sales for the year, however, were the highest on record since 2006.<\/p>\n

These releases are extremely important, McDonald said, because the housing market can indicate the state of the economy as a whole.<\/p>\n

\u201cDuring the financial crisis of 2008, the downturn in the economy was really led by the collapse of the housing market,\u201d he said. \u201cThe housing market is very important. This survey is a partial look at it, but important nonetheless.\u201d<\/p>\n

Photo at top:\u00a0 A home for sale in Montana. New home sales dropped by 9.3 percent in December, the sharpest decrease since August 2016. (Matthew Hoelscher\/CREATIVE COMMONS)<\/div>\n","protected":false},"excerpt":{"rendered":"

By Sarah Foster Medill Reports Americans purchased fewer homes than expected last month, but economists are still pointing to 2017 as a healthy year for the housing market. December sales of newly built single-family homes plunged 9.3 percent to a seasonally adjusted rate of 625,000, the sharpest decline since August 2016, according to a report […]<\/p>\n","protected":false},"author":438,"featured_media":65791,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27,3912],"tags":[],"class_list":["post-65788","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-fall-2017"],"yoast_head":"\nNew home sales drop in December - Medill Reports Chicago<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/news.medill.northwestern.edu\/chicago\/new-home-sales-drop-in-december\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"New home sales drop in December - Medill Reports Chicago\" \/>\n<meta property=\"og:description\" content=\"By Sarah Foster Medill Reports Americans purchased fewer homes than expected last month, but economists are still pointing to 2017 as a healthy year for the housing market. 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