NEW YORK (PNN) - January 19, 2018 - New home sales decline 9.3% in December and there were significant negative revisions in both October and November. Yet, Econoday labeled the report "solid".

The headline 9.3% decline in new home sales for December masks what is actually a solid new home sales report. December's 625,000 annualized rate is the fourth best of the expansion and follows November's revised 689,000 rate, which is the very best; and importantly, supply moved into the market, up 3.9% at 295,000 units. On a sales basis, supply improved to 5.7 months from November's 4.9 months. Prices were steady in the month with the median edging up 0.1% to $335,400 for, however, very modest year-on-year improvement of only 2.6%. But prices may have room to move higher given that the sales rate is up 14.1% on the year with supply up 15.2%.

The downward revisions in today's report are significant, totaling 69,000 going back to October but this is really no surprise given how volatile this report always is. But the bottom line is upward sales momentum, incoming supply, and room for prices to move higher. Residential investment has been dragging down GDP in recent quarters but today's report points to a solid contribution for tomorrow's fourth-quarter report.

Supply increased because sales plunged; and year-over-year supply is up more than year-over-year sales.

Prices can always move higher of course, but Econoday's price statement is backward. It would make more sense to say, with supply up more than sales, there is room for prices to fall.

Yes, this was a good quarter for housing, assuming there are no additional negative revisions. But this was not a good report. Let's not confuse the two.