U.S. new home sales slip to 10-month low in December, jobless claims climb

New U.S. single-family home sales fell to a 10-month low in December after three straight months of solid gains, but the housing market recovery remains intact as a tightening labor market boosts wage growth.

While other data on Thursday showed a bigger-than-expected increase in the number of Americans filing for unemployment benefits last week, the four-week moving average of claims dropped to levels last seen in 1973.

There was also good news on the economy with the goods trade deficit falling in December as exports rose. With trade expected to have weighed on economic growth in the fourth quarter, last month’s rise in exports bodes well for output in early 2017.

The Commerce Department said new home sales dropped 10.4 percent to a seasonally adjusted annual rate of 536,000 units last month. Economists polled by Reuters had forecast single-family home sales, which account for 8.9 percent of overall home sales, slipping 1.0 percent.

Many economists did not believe that the decline in sales was in response to a recent run-up in mortgage rates as applications for loans to purchase houses rose in December. A homebuilders survey also showed strong sales gains last month. Cold weather could have impacted on sales.

“December’s decline is probably mostly a result of volatility rather than a drop in the underlying fundamentals for housing demand, despite the rise in mortgage rates,” said David Berson, chief economist at Nationwide in Columbus, Ohio.

New home sales, which are derived from building permits, are volatile on a month-to-month basis and subject to large revisions. Sales increased 12.2 percent to 563,000 units in 2016, the highest since 2007.

With the labor market considered as being at or near full employment, and pushing up wages, demand for housing is likely to remain supported. But a chronic shortage of properties for sale remains an obstacle to a robust housing market.

A report from the National Association of Realtors on Tuesday showed the supply of previously owned homes for sale dropped to a 17-year low in December.

The PHLX housing index .HGX rose 0.67 percent on Thursday amid expectations that homebuilders would need to ramp up construction to meet demand for housing. Shares in the nation’s largest homebuilder, D.R. Horton (DHI.N), gained 0.54 percent. and Lennar Corp (LEN.N) climbed 0.53 percent.