Monthly New-Home Sales Rise,
But Year Is Worst Since 1990

New-home sales finished 2006 on a positive note, rising a second straight month in December, but demand for the whole year took its biggest tumble since 1990.

Separately, durable-goods orders climbed last month, boosted by a sharp jump in orders for commercial aircraft, though demand rose across the board. Business-equipment spending rebounded.

In the home-sales report, sales of single-family homes increased by 4.8% to a seasonally adjusted annual rate of 1.120 million, the Commerce Department said Friday. November sales rose 7.4% to 1.069 million, revised from a previously estimated 3.4% advance to 1.047 million.

Economists had expected a 1.2% increase to an annual rate of 1.060 million last month.

On a not seasonally adjusted basis, new-home sales fell 17.3% in 2006 to an estimated level of 1.061 million, the largest drop since 17.8% in 1990. The housing sector has restrained economic growth, which slowed in the third quarter to a 2.0% pace. The housing component of gross domestic product plummeted by 18.7%, which was the sharpest drop in 15 years and robbed GDP of 1.20 percentage points.

Surging demand in certain markets across the U.S. during the housing boom sent prices skyward and builders breaking ground. Sales peaked in 2005 and began receding, while inventories climbed, which slowed builders down.

New-home inventories fell in December, a sign builders are getting supply under control. There were an estimated 537,000 homes for sale at the end of the month -- the lowest level since 522,000 in January 2006, the government data showed. That represented a 5.9 months' supply at the current sales rate. An estimated 542,000 homes were for sale at the end of November, a 6.1 months' inventory. In December 2005, the supply was 4.8 months.

Prices were down a bit. The average price of a new home decreased to $290,100 from $290,800 in November and below $290,200 in December 2005. The median price rose to $235,000 last month from $232,200 in November but was lower than the year-earlier level of $238,600.

Financing costs drifted down in December. The average rate on a 30-year mortgage was 6.14%, lower than 6.24% a month earlier and 6.27% in December 2005.

By region, new-home sales last month rose 26.6% in the Midwest, 27.3% in the Northeast, and 0.3% in the South. Demand fell 4.4% in the West. Based on figures unadjusted for seasonal factors, an estimated 76,000 homes were actually sold last month in the U.S., up from 75,000 in November.

Spending on Durable Goods Climbs

Orders for durable goods, big-ticket items such as cars and appliances meant to last three years or more, advanced 3.1% last month to a seasonally adjusted $221.87 billion, the Commerce Department said Friday. Durables rose 2.2% in November, revised from a previously estimated 1.6% increase. For all of 2006, durables rose at a not seasonally adjusted 7.0%, after rising 8.6% during 2005.

Orders for commercial planes increased 26.5% last month, while military aircraft orders rose 20.5%. Overall, transportation orders were up 4.8%, after rising 10.2% in November. However, a key barometer of business-equipment spending -- orders for nondefense capital goods excluding aircraft -- increased by 2.4%, after falling 1.0% in November.

While demand was up across the board, the overall 3.1% rise in durable-goods orders fell short of the 3.9% economists had expected, according to a survey by Dow Jones Newswires.

Motor vehicles and parts orders increased by 6.8% last month; for the year, on a not seasonally adjusted basis, motor vehicle bookings were 2.2% lower. Orders for all durables except transportation goods increased 2.3%, after falling 1.0% in November. Demand increased 2.5% for fabricated metals, 4.5% for primary metals, 5.0% for machinery, and 1.0% for computers and electronics. Demand decreased 1.4% for electrical equipment.

Capital-goods orders rose by 5.5% last month. Nondefense capital goods -- items meant to last 10 years or longer -- increased 9.0%. Defense-related capital goods orders fell 17.5%. Inventories rose 0.4%. Unfilled orders, a sign of future demand, rose 2.3%.

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