Cold weather chills U.S. home sales in December

U.S. home sales dropped beneath analysts’ expectations in December, as the winter freeze slowed down market activity.

Home purchases in December dropped seven percent year-over-year to 414,000, according to data from the Commerce Department. The slowdown was a result of the coldest December in four years coupled with rising interest rates. The cold weather also impacted housing starts, which fell 9.8 percent month-over-month in December to an annualized rate of 999,000.

“I wouldn’t panic, but it’s obviously not a good report,” Michael Hanson, an economist with Bank of America, told Bloomberg News. “I don’t feel like this is the beginning of the end of the housing recovery by any stretch.”

Policy makers from the Federal Reserve, who will begin a two-day meeting tomorrow to discuss changes to the stimulus package, have said that bond purchases will be reduced in measured steps. [Bloomberg News]  — Hiten Samtani