The Commerce Department says new-home sales rose 1.6 percent last month to a seasonally adjusted annual rate of 315,000. That's less than half the 700,000 new homes that economists say should be sold to sustain a healthy housing market.
It's also below the 323,000 homes sold last year - the worst year for sales on records dating back to 1963. December would have to produce its best monthly sales total in four years for 2011 to finish ahead of last year's total.
New homes account for less than 10 percent of the housing market. But they have a big impact on the economy. Each new home built creates roughly three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
Economists note that housing is a long way from fully recovering and that many people are opting to rent because they can't afford to buy or don't feel a home is a wise investment right now.
Home construction has begun a gradual comeback and should add to economic growth in 2011. But the main reason for that increase is that the rate of apartment construction is nearly twice as fast as it was two years ago. Single-family-home construction remains depressed.
"New-home sales only capture one-family homes sold, and the recent pick-up in multifamily construction does not feed into these numbers," said Yelena Shulyatyeva, an analyst at BNP Paribas.
Builders have stopped working on many projects because it's been hard for them to get financing or to compete with cheaper re-sale homes. In November, builders slashed prices to their lowest levels in more than a year. The median sales price of a new home dropped nearly 4 percent last month to $214,100.
The job market is improving but remains weak, and unemployment is still high at 8.6 percent. Some people who want to buy can't qualify for a loan or make the higher down payments that banks are demanding.
Even so, rising interest from potential buyers left U.S. homebuilders slightly less pessimistic about the housing market in December, according to the National Association of Home Builders/Wells Fargo builder sentiment index. It rose 2 points this month, reaching its highest level since May 2010.
Yet sales are slumping even though mortgage rates have fallen to record lows. This week, the average rate on a 30-year fixed home loan dropped to 3.91 percent, the lowest rate ever, mortgage buyer Freddie Mac said Thursday.
In selling new homes, builders must compete with foreclosures and short sales - when lenders accept less for a house than what is owed on the mortgage.
Sales of previously owned homes are also dismal. They rose slightly last month to a seasonally adjusted annual rate of 4.42 million units, the National Association of Realtors said this week. That's below the 6 million that economists say is consistent with sales in a healthy market and barely ahead of 2008's revised totals, which were the worst in 13 years.