Sales of new single-family homes are up 2.3 percent in December to 616,000 after a downwardly revised 602,000 in November. Starts are down 26.6 percent compared to a year ago. The December level is essentially the same as the consensus of 614,000 in an Econoday survey.

The modest uptick in month-over-month sales in October, November, and December has reduced the supply of homes available for sale. Homebuilders have been cutting back on residential construction projects, especially for single-family homes. The months' supply of homes for sale is down to 9.0 in December, after 9.2 in November, 9.4 in October, and the recent peak of 10.1 months in October.

Sales are aided by declines in prices in the last two months. The December median home price is $442,100, down 3.7 percent from $459,000 in November. Prices are still going up on a year-over-year basis with December up 7.8 percent compared to a year-ago.

The share of homes sold in December shows a shift to lower-priced units. Of the unadjusted total of 47,000 units sold in December 11 percent were in units under $300,000, up from a 7 percent share in November. Units sold in the $300,000-$499,000 price range account for 51 percent of the December total compared to 55 percent in November. Sales of units at $500,000 and over were unchanged with a 38 percent share.

Limited supplies of finished homes and a sense of urgency to purchase while mortgage rates are below the peak seen in October and November mean that new home buyers are committing to homes not yet built. The share of the adjusted total of 616,00 homes sold in December that were not yet started rose to 25 percent from 19 percent in November, was little changed for those under construction at 43 percent in December compared to 44 percent in November, and were down from completed units to a 32 percent share after 37 percent in the prior month.

New home sales in December, which in November reversed a run of declines, are expected to revert to trend at a 614,000 annualized rate versus November's 640,000.

New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances.

This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as new home sales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic"ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, new home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.