Inclement weather probably dealt a setback to some builders. The extent of snow cover in the contiguous U.S. was the eighth-largest on record for the month, according to the National Oceanic and Atmospheric Administration. It also marked the coldest December since 2009, the agency said.
Such conditions weighed on construction as well. Housing starts fell 9.8% last month to an annualized rate of 999,000 following November’s 1.11 million pace, which was the highest since November 2007, the Commerce Department said earlier this month. Work on single-family houses dropped 7% to a 667,000 rate from 717,000 the prior month.
Today’s report showed the median sales price of a new home rose 4.6% from December 2012 to $270,200. Higher prices, along with borrowing costs, have made purchases more difficult for some buyers. The average rate for a 30-year fixed mortgage was 4.39% last week, up from 3.35% in early May, according to data from Freddie Mac in McLean, Virginia.
New-home sales, which account for about 7% of the residential market, are tabulated when contracts are signed, making them a timelier barometer than transactions on existing properties.
Purchases of previously owned homes climbed in December for the first time in five months, rising 1% to a 4.87 million annual pace, the National Association of Realtors reported Jan. 23. Combined sales of existing and new dwellings increased to 5.52 million in 2013, the strongest year for residential real estate since 2006.
Caterpillar Inc., the largest maker of mining and construction equipment, today forecast earnings and revenue for 2014 that topped analysts’ estimates as the recovery in U.S. homebuilding spurs sales of bulldozers and excavators.
The Peoria, Illinois-based company forecast world economic growth at about 3% this year, up from about 2% in 2013. It predicted sales in its power systems and construction industries units will rise 5%.
New-housing demand has rebounded from a record-low 306,000 homes sold in 2011. That compares with a record peak of 1.28 million in 2005 at the height of the housing boom.
December purchases dropped in three of four regions, led by a 36.4% plunge in the Northeast, the smallest market. The two largest areas, the South and West, also declined, while the Midwest jumped 17.6%.
The supply of homes at the current sales rate rose to 5 months, the most since September, from 4.7 months in November. There were 171,000 new houses on the market at the end of December, the fewest since July.
Builders see plenty of room for growth this year, said Jeffrey Mezger, chief executive of KB Home in Los Angeles.
“The fundamental drivers of a housing recovery remain in place, although conditions are not as favorable as they were six months ago,” Mezger said on a Dec. 19 earnings call. While borrowing costs and home prices have increased, “affordability is at attractive levels, demographics remain strong and there’s pent-up demand.”
While higher borrowing costs and prices are keeping some people out of the market, that pause should be short-lived, Mezger said.
“In the meantime, we feel that less upward pressure on home prices is healthy for a measured, sustainable housing recovery,” he said.