Sales of New Homes Rise to All-Time High in 2004

Sales of new homes rose to an all-time high in 2004, the fourth straight annual record. But activity in December barely budged after a big drop the previous month, suggesting the nation’s red-hot housing market may finally be cooling.

The Commerce Department reported Monday that sales of new single-family homes climbed 8.9% for all of 2004 to a record high of 1.18 million, up from 1.09 million in 2003.

But sales rose a lower-than-expected 0.1% in December after having fallen 13.1% in November.

Sales of both new homes and previously owned homes have set records for the last four years as home buyers have enjoyed the lowest mortgage rates in their working lifetimes, making housing one of the standout performers for the economy.

The softness in sales will probably be accompanied by a slowdown in the rate of increase for housing prices, which have been surging in recent years.

For 2004, median new-home prices rose 12.3% to $218,900 from $195,000 in 2003. The median is the point at which half the homes sell for more and half for less.

For December, new-home sales were up 55.5% in the Midwest and 6.3% in the West.

Sales fell 16.3% in the South and were down 15.7% in the Northeast.

In other economic news, the Commerce Department reported that Americans’ personal income, boosted by a large dividend payment from software giant Microsoft Corp., rose a record 3.7% in December. That helped boost consumer spending a solid 0.8% during the holiday season.

The government said the increase in incomes would have been a much smaller 0.6% without the one-time $3-a-share dividend payment Microsoft made in December.

The Commerce Department also said U.S. economic growth would be revised because of a miscalculation by Canadian officials, but revisions would not be revealed until the next scheduled report Feb. 25.

The correction to trade data is expected to boost fourth-quarter U.S. gross domestic product as much as half a percentage point, nudging economic growth up from the disappointing 3.1% annual pace reported Friday, analysts said.

*

Reuters was used in compiling this report.