“WASHINGTON (MarketWatch) - Sales of new homes were nearly unchanged in December after a big drop off in November, the Commerce Department reported Monday. New home sales increased 0.1 percent to a seasonally adjusted annual rate of 1.098 million units in December from a downwardly revised 1.097 million in November. The inventory of unsold homes on the market increased by 2.6 percent to 432,000, the highest level in 31 years. The inventory represents a 4.8-month supply at current sales rates, the highest since July 2000. Economists were expecting a bounce back in sales to about 1.18 million in December.”

The real estate engine which has been helping to power consumption by building the debt bubble is faltering. November’s fall was dismissed as an anomaly. December may be a coincidence, but I doubt it. Remember the old adage: Once is a random event, twice is a coincidence, but three times is enemy action. January’s numbers will tell the tale.

“The current status of the housing market is a close match to the three episodes of 1973, 1979, and mid-1980 to late-1980s. Based on this historical information, a sharp deceleration of single-family home prices in the near term is not far fetched.”

Northern Trust