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Ahead of the Bell: US New-Home Sales

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January 27, 2014 06:27 AM EST | AP


WASHINGTON (AP) — The Commerce Department reports on sales of new homes in December. The report will be released at 10 a.m. EST Monday.

SALES SLIP: The forecast is that sales slipped slightly in December, falling 1.5 percent to an annual rate of 457,000, according to a survey by FactSet.

SUMMER LULL: Sales also fell in November but the government released more positive figures for the previous three months, a sign that housing may be regaining strength after a summer lull.

HOUSING REBOUND: Housing was one of the strongest sectors of the recovery in the first half of 2013, but then it hit a lull during the summer when mortgage rates jumped higher on indications the Federal Reserve might soon start reducing the bond purchases it was making to keep long-term interest rates low.

But analysts expect housing is set to regain some lost momentum.

Sales of previously occupied homes rebounded 1 percent in December helping that market to sales for all of 2013 of 5.09 million. That was the best performance since 2006 when sales totaled 6.48 million. However, the sales gains in both 2005 and 2006 represented an unsustainable housing boom which collapsed, helping drag the economy into a deep recession which triggered a painful retrenchment in housing.

Analysts expect housing will keep recovering in 2014 but they don't look for the sales gains to be as large as they were in 2013.

Economists at Global Insight predict that growth of existing home sales will slow a bit from the 8.8 percent gain in 2013 but still show a respectable increase of 5.1 percent in 2014.

Mortgage rates rose in the summer to nearly a full percentage point higher than they were in the spring, when they were at record lows. And a limited supply of homes on the market helped drive up prices. The combination of rising mortgage rates and rising prices made home buying less affordable, particularly for first-time buyers.

Builders started work on 923,000 new homes and apartments in 2013, up 18.3 percent from 2012. It was the fourth straight annual gain and the strongest construction pace since 2007 when 1.36 million homes were started.