Housing Indexes: Hold That Thought

The housing market may be stabilizing, as we discussed yesterday, but a disappointing New Home Sales report has tempered enthusiasm for a strong recovery.

New home sales declined in December to a 307,000 annual pace, lower than the median economist forecast of 320,000. The number represented a 2.2 percent drop from November. The area hit hardest was the South. According to Bloomberg News, 2011 marked the slowest year on record for builders.

Median home prices also fell in December, dropping 2.5 percent to $210,300. Year-over-year, the median price is down 12.8 percent.

While frustrating, there are some positives. As we discussed last week, December Existing Home Sales increased to drop the existing supply on the market to 6.2 months. Foreclosure activity also increased during the end of the year. Surplus supply and foreclosures are a reason for declines in home prices and new home purchases. As supply and foreclosures clear, we should start to see a slow improvement in median home price. Of course, continued improvement in employment rates and the national economy will also help the march of progress.

Central Coast Lending is a mortgage broker with offices in Morro Bay, San Luis Obispo, Paso Robles and Arroyo Grande.