WASHINGTON (AP) — Modest increases in new-home sales at the end of last year will likely add to growing optimism that the housing market is starting to recover. But the gains won't prevent 2011 from being the worst year for new-home sales on record.
Sales last month are expected to rise to a seasonally adjusted annual pace of 320,000, according to a survey of economists by FactSet. That would be the fourth straight monthly increase.
Still, the pace is less than half the 700,000 that economists say must be sold to sustain a healthy housing market. And total sales last year are expected to be fewer than the 323,000 sold in 2010 — the lowest on records dating back to 1963.
The Commerce Department will release the report at 10 a.m. Eastern time Thursday.
Rising new-home sales would coincide with other encouraging signs across the housing industry.
Sales of previously occupied homes rose in December for a third straight month. Mortgage rates have never been lower. Homebuilders are slightly more hopeful because more people are saying they might consider buying this year. And home construction picked up in the final quarter of last year.
And hiring has improved, which is critical to a housing rebound. Fewer people are seeking unemployment benefits than at any time in nearly four years, which is evidence of far fewer layoffs. The unemployment rate fell in December to its lowest level in nearly three years.
Economists caution that housing is a long way from fully recovering. Builders have stopped working on many projects because it's been hard for them to get financing or to compete with cheaper resale homes. For many Americans, buying a home remains too big a risk more than four years after the housing bubble burst.
Though new-home sales represent less than 10 percent of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.
A key reason for the dismal 2011 sales is that builders must compete with foreclosures and short sales — when lenders accept less for a house than what is owed on the mortgage
Builders ended 2011 with a third straight year of dismal home construction and the worst on record for single-family home building. But in a hopeful sign, single-family home construction, which makes up 70 percent of the market, increased in each of the last three months.
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