New Home Sales in November Were Down 34.4% from a Year Ago

Admittedly, the new home sales data issued by the Dept. of Commerce is subject to good bit of statistical error that is eventually reduced over about four months. None the less, the numbers continue to be comparable to those of the 1990s. Text in bold is my emphasis. From the WSJ:

New-home sales retreated during November, sinking to the lowest annual rate in 12 years. Home prices also receded, a further negative sign for consumer spending and the economy.

Sales of single-family homes decreased by 9% last month to a seasonally adjusted annual rate of 647,000, the Commerce Department said Friday. October new-home sales rose 1.7% to an annual rate to 711,000; originally, the government said October sales rose by 1.7% to 728,000. . . . . The actual rate of 647,000 reported for the month was the lowest recorded since 621,000 in April 1995.

Year over year, new-home sales were 34.4% lower than the level in November 2006. That's the largest year-to-year decline since 35.3% in January 1991.

The median price of a new home decreased by 0.4% to $239,100 in November from $240,100 in November 2006. The average price advanced by 0.5% to $293,300 from $291,800 a year earlier. In October this year, the median price was $229,500 and the average was $307,900.

The ratio of new houses for sale to houses sold rose during November, going to 9.3. It was 8.8 in October; originally, the government estimated the October ratio at 8.5. Friday's data showed an estimated 505,000 homes for sale at the end of November, down from October's 514,000.

Regionally last month, new-home sales decreased 6.4% in the South, 19.3% in the Northeast, and 27.6% in the Midwest. Sales rose 4% in the West.

An estimated 46,000 homes were actually sold in November, down from 55,000 in October, based on figures not seasonally adjusted.

I would like to add to the article above some comments from the WSJ economics blog.

Home prices were mixed. Over the year, median prices slipped by just 0.4% while average prices rose by 0.5%. Much of this “strength” reflects the changing regional mix of sales. In addition, home builders’ sales incentives are not included so actual transaction prices are even weaker. Bottom Line: New home sales plunged in November and the trend is definitely lower. In addition, there is absolutely no indication that home sales have reached a bottom. … Prices are falling, more sharply in some regions that in others. – Steven Wood, Insight Economics

It appears quite clear at this juncture that the consumer has reached a psychological point where expectations of future price declines have become entrenched. We consider this to be eminently rational behavior on the part of potential homeowners and until the new homes market observes a decline in the median price of homes and falling rates, there will be little incentive to step up purchasing activity. – Joseph Brusuelas, IDEAglobal

This was obviously a stunningly weak report, particularly given the aggressive price-cutting that homebuilders have been implementing …. However, with demand falling, unsold inventories remain high and the months’ supply at the current sales rate is quite lofty … . None of this bodes well for near-term conditions, and prices will need to fall further to help clear the market. … Interestingly, the relation between mortgage applications for purchases and reported sales of new homes seems to have broken down in the past year or so, with applications well above where they have historically been at current sales rates. This could be due to multiple applications being filed by potential homebuyers in order to try to ensure a mortgage approval. – Joshua Shapiro, MFR Inc.