New home sales fell to their lowest level since 1963 in December continuing a downward trend that has been in place since mid-2005. Sales of new homes declined 14.7% last month to an annualized pace of 331,000. As weak as this sales pace is, it could be overstated because of the high number of contract cancellations that are not accounted for in the data. For all of 2008, sales have declined 44.8% and are now 76.2% below their peak reached in July 2005. Regionally, new home sales fell in all areas with the sharpest declines in the Northeast and West. The sluggish pace of new construction has kept inventories at a minimum with the inventory of new homes for sale down to 357,000 in December from 397,000 in November. However because of the greatly reduced pace of sales, the supply increased to 12.9 months from 12.5 previously. Prices also r emain on a downward slope with median prices dropping 9.3% to $206,500 over the last year and average sales prices decreasing 13.2% to $246,900. The downside surprise in new home sales seems to have caught many off-guard given the drop in mortgage interest rates and the rebound in existing home sales last month and the fact that the new home market just does not have that much further to fall. The outlook is not good either with new home sales expected to continue weakening until demand can be restored.
New orders for durable goods sank 2.6% in December more than an expected decline of 2.0%. Most major industry categories posted sharp declines last month except orders for electrical equipment. Spending on big ticket items and capital goods by consumers and businesses has fallen off sharply during the recession. The weakness in new orders portends of continued weakness in 2009.
Jobless claims increased 3k to 588k for the week ending January 24. Initial jobless claims remain elevated indicating a high pace of layoffs. Continuing jobless claims swelled by 159k to a record high of 4.776 million for the week ending January 17. The sharp gains in continuing claims show that people are remaining on unemployment benefits longer because hiring remains extremely weak. The insured jobless rate jumped to 3.6% its highest level since 1983.