NEW YORK (MainStreet) – In the “too good to be true department" some red flags are poking up on the housing landscape, indicating homeowners and banks may have gotten a bit ahead of themselves on forecasting a housing recovery.
The latest sign? Housing sales are down in December.
The Commerce Department reported yesterday that sales of new single-family homes in Dec. 2011 were at a seasonally adjusted rate of 307,000 – down 2.2% from November 2011 and 7.3% from Dec. 2010.
The average sale price was $266,000 and there were an estimated 302,000 new homes sold in the U.S. in 2011. That’s 6.2% lower than 2010 numbers. The U.S. South and Midwest lost ground for the month, while the Northeast and West saw an uptick in home sales.
The news hit the housing market like a sledgehammer: All that talk of a housing market bottom turned to talk of a continued housing slump.
Of course, one month doesn’t constitute a trend, as housing market specialists noted after the release.
“December’s small decline in new-home sales follows three consecutive months of gains and means the fourth quarter was still stronger than the third,” says Bob Nielsen, chairman of the National Association of Home Builders in an official statement. “The bottom line is that, while 2011 was the worst year for new-home sales on record, signs of gradual improvement began to emerge near the end of the year across a growing number of markets. This nascent recovery should continue to gain strength in the year ahead as more buyers take advantage of the very good deals that out there for newly built homes.”
Others took the news in an even calmer stride.
“Even with a modest decline, the preceding two months of contract activity are the highest in the past four years outside of the homebuyer tax credit period,” says Lawrence Yun, chief economist at the National Association of Realtors. “Contract failures remain an issue, reported by one-third of realtors over the past few months, but home buyers are not giving up.”
So what does the soft month of December mean to homeowners? In a word, not much – yet. If January 2012 home sales come in as weak as December, then it might be time to worry.
With home sales down, homeowners are more likely to hang on to their homes and not look to upgrade. That shuts out younger would-be homebuyers and leaves less cash in the pockets of homeowners who might otherwise sell their homes for a decent profit.
That’s not good for homeowners and it’s not good for the economy, which hangs ever so perilously in the balance as the housing market stubbornly refuses to gain momentum.
Home sales are one indicator of the overall health of the economy, but they're by no means the only one. Check out MainStreet’s 5 Hopeful Signs for the U.S. Economy in 2012 for an idea of what’s ahead!