. real-estate market goes up except in West


New home sales rebounding

U.S. real-estate market goes up except in West

By Courtney Schlisserman

January 27, 2007

New home sales in the United States rose a higher-than-expected 4.8 percent in December, showing that the real-estate market is improving after its biggest slump since 1990.

Sales rose to an annual pace of 1.12 million in December – the most since April – from a 1.069 million rate the prior month, the Commerce Department said yesterday. Economists had forecast the new home sales would rise to an annual rate of 1.052 million, according to a Bloomberg News survey.

Buyers were inticed back into the market after builders cut prices and sweetened incentives. Combined with more jobs, rising incomes and still-cheap mortgage rates, the sales increase may give homebuilders reason to be more optimistic on the outlook for this year.

"This is adding to a lot of other reports that are suggesting that the worst of the housing cycle is over," said Stephen Gallagher, chief U.S. economist at Societe Generale SA in New York.

Sales for the full year of 2006 dropped 17 percent, the biggest decline in 16 years, to 1.061 million from a record 1.283 million in 2005.

The median price of a new U.S. home fell 1.5 percent in December, to $235,000 from $238,600 a year earlier. The median price of $245,300 for all of 2006 was 1.8 percent higher than the previous year.

The number of homes for sale at the end of the month fell to 537,000, the fewest since January, from 542,000 in November. That left the supply of homes nationwide at the current sales rate at 5.9 months’ worth, compared with 6.1 months in November.

Builders are offering more incentives, such as lower mortgage rates through their affiliates and free kitchen upgrades, to reduce inventory.

"We know that builders don’t sit around with inventory on their books," said Julia Coronado, an economist at Barclays Capital in New York. "One way they do that is by adding incentives and lower prices."

Sagging home sales and increased contract cancellations caused builders in the second half of last year to reduce construction. Residential construction fell by the most in 15 years in the third quarter, restraining economic growth to an annual rate of 2 percent, the weakest this year. On Wednesday, the Commerce Department is scheduled to release figures for the fourth quarter.

Compared with a year earlier, new home sales for December were down 11 percent.

Sales rose in three of four regions, led by 27 percent increases in both the Northeast and Midwest. Sales in the South rose 0.3 percent. They declined 4.4 percent in the West.

Even with the stabilization in sales, housing probably won’t contribute to economic growth this year, economists said.

The Commerce Department also reported yesterday that durable goods orders rose 3.1 percent in December, after a 2.2 percent November gain. Excluding transportation, orders increased 2.3 percent, the most since March.