U.S. New Home Sales Surged 17.5% to an Eight-Month High in December

New home sales jumped 17.5% to an annualized 329,000 units in December
following the downwardly revised flat reading of a 280,000 pace
(previously 290,000) in November. Market expectations were for a more
moderate increase to 300,000. The strong finish to the fourth quarter
of 2010 pushed the quarterly pace of new home sales 1.7% above that of
the previous quarter, marking the first increase since the third
quarter of 2009. With that said, the 321,000 total for 2010 was the
lowest on record dating back to 1963. The monthly increase in the pace
of sales and a 2.6% decline in homes available for sale pushed the
months' supply of unsold new homes down sharply to 6.9 from 8.4 in
November, the lowest level since April 2010.

The strong increase in the pace of new home sales in December was
largely the result of a mammoth 71.9% surge in the West, which
followed November's outsized 30.6% increase. The Midwest (3.2%) and
the South (1.8%) posted far more moderate increases in the month,
while new homes sales declined for the third consecutive month in the
Northeast (-5.0%).

Inventories, as measured by months' supply of unsold homes on the
market at the current sales rate, dropped sharply to 6.9 in December
from 8.4 in November. The inventory of new homes for sale declined
2.6% to 190,000 in December from 195,000 in November, which was the
eleventh consecutive month in which new homes for sale either held
steady of decreased. The drop in months' supply is now within striking
distance of the series' long-term average of 6.2 and well below the
recent peak of 12.1 months seen in January 2009.

Today's report rounds out a month of housing data releases that have
been quite mixed. Housing starts and prices declined, permits and
sales, rose and the homebuilders' sentiment index held steady. While
this month's Beige Book noted that "residential real estate markets
remained weak across all Districts" for the end of 2010, there is
evidence that the market stabilized (although at very depressed levels
of activity) in the fourth quarter. As a result, we do not expect
Friday's release of fourth-quarter 2010 real GDP to repeat the
outsized 27.3% drop in residential investment seen in the third
quarter and, combined with the recent pick-up in consumer spending and
indications that net trade could contribute more to growth than we
previously expected, is consistent with our expectation that overall
GDP growth accelerated to a 3.5% annualized rate in the fourth quarter
from the 2.6% increase in the previous quarter.
Source: ActionForex.Com