New home sales show record gains in December

A sharp increase in new home sales in December gave an unexpected boost to the real estate market, although analysts say some of the improvement may actually be misleading.

The Commerce Department says the sales of newly built single-family homes increased by 17.5 percent compared to the previous month, the largest jump in terms of percentage since 1992. However, even with the strong finish, the yearly total of 321,000 homes was the lowest in 43 years and 14 percent below last year.

Much of the increase was due to a 72 percent increase in sales in the West region. Some analysts have pointed to a now-expired tax credit in California as a contributing factor, saying the overall outlook for the market is less optimistic.

"I read today's report as a promising sign that the new-home sales market is re-starting its long journey to a more normal pace after the lull that began in May," said National Association of Home Builders chief economist David Crowe.

The Houston real estate market has performed much better in relative terms. A report by Metrostudy found that as of the third quarter of last year, new home sales were down just 4 percent compared to a year ago.