New Home Sales Better than Expected

New home sales, which were released this morning, were better than expected. Although the numbers were supposedly good, I don’t think that they are as confounding, in the context of the bear case, as some people think. In light of the weak existing home sales numbers from a few days ago, and the fact that new home sales median price declined 3.4%, it would seem to me that the homebuilders were only able to move their houses by dropping prices. Existing home sellers who want to sell are eventually going to figure out the same thing, that if you want to sell your house, you have to lower the price.

“Jan. 27 (Bloomberg) -- Sales of new U.S. homes unexpectedly increased in December, capping a fifth straight record year for the industry and suggesting job and income growth are keeping the housing market from withering.
Purchases rose 2.9 percent to a 1.269 million annual rate from November's revised 1.233 million pace, the Commerce Department said today in Washington. A record 1.282 million new homes were sold in 2005, and the median selling price in December of $221,800 was down 3.4 percent from a year earlier.”

More…