New-Home Sales in ’96 Reach 18-Year High
New-home sales in 1996 were the strongest in 18 years, the government said Tuesday, easing only slightly at the end of the year as a key private-sector gauge of overall economic activity signaled steady moderate growth ahead.
New-home sales edged down 1% in December to a seasonally adjusted annual rate of 783,000 units after a revised 17.7% surge in November.
But for all of 1996, sales climbed 13.3% from 1995 to 756,000--the best performance since 817,000 new homes were sold in 1978, the department said.
Analysts said strong job growth and relatively low mortgage rates accounted for the strong housing activity, though they forecast some easing in the sales pace this year.
Separately, the Conference Board in New York said its index of leading indicators gained 0.1% in December after a revised 0.2% November rise--enough to point to ongoing expansion six to nine months ahead.
The latest reports showing a strong economic close to 1996, but a moderating tone ahead, came as Federal Reserve Board policymakers were preparing for a two-day meeting to plot interest-rate strategy.
Most analysts were betting the U.S. central bank would decide today to keep rates steady in the absence of a clear-cut inflationary risk amid a moderating economic tempo. Wall Street also seemed to believe that the Fed will take no action, with stocks and bonds rallying.
Nearly seven years after the current expansion began in March 1991, the economy still shows significant strength in key sectors, such as housing.
December’s sales rate of 783,000 was 14.6% above the rate a year earlier in December 1995 of 683,000. That followed an upward revision in November sales that previously had been reported rising only 14.2% to a rate of 772,000.
“It basically tells us that home sales activity continues to be somewhat brisk,” said economist David Lereah of the Mortgage Bankers Assn. “There is still a very healthy appetite out there to buy homes.”
One favorable sign for the industry was that inventories of finished but unsold homes were leaner in December than they had been a year ago. The Commerce Department estimated there were 5.2 months’ worth of homes available at last month’s sales rate, down from 6.6 months’ worth in December 1995.
“There has been a very positive reduction in unsold inventory in 1996,” said economist David Seiders of the National Assn. of Home Builders, adding that “the supply-demand relationship is better going into 1997 than it was going into 1996.”
Nonetheless, Seiders said he expected 1997 sales of new homes to fall back by about 8% to 9% this year to about 690,000. A slowdown would be normal after such a strong sales year as was recorded in 1996, he said.
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Leading Indicators
Seasonally adjusted index; 1987=100
December 1996: 102.8
Source: Conference Board
Monthly New-Home Sales
Seasonally adjusted annual rate, in thousands of units:
Dec. 96: 783
Source: Commerce Department
Annual New-Home Sales
Seasonally adjusted annual rate, in thousands of units:
1996: 756
Source: Commerce Department
