One of these months, new-home sales are going to show that Americans have decisively returned to buying newly built residences. Unfortunately, November was not that month: New-home sales rose a less-than-expected 5.5% to a 290,000-unit annual rate, the U.S. Commerce Department announced Thursday.
A Bloomberg survey had forecast that figure would rise to a 300,000 annual rate in November, after falling to a revised 275,000 pace in October -- down from initial estimates of 283,000. New-home sales hit an annual rate of 308,000 units in September and an all-time low of 274,000 in August.
There were two bright spots in November's report. First, the year-over-year decline lessened. New-home sales are now down 21.2% in the past year, compared to November 2009, an improvement from the 26.8% year-over-year decline recorded in October.
Second, inventory declined to an 8.2-month supply at the current sales pace in November, down from 8.6 months in October. However, that's still well above normal three- to five-month levels.
A Long Way From the Roaring 90s
November sales rose in two of four U.S. regions, jumping 5.8% in the Midwest and a whopping 37.3% in the West, but they plunged 26.7% in the Northeast and 13.2% in the South. The median home price in November was $213,000, up 9.2% from $194,900 in October.
Sales are down about 64% from the average 800,000-unit annual rate hit during the Roaring 90s, a period of strong U.S. GDP and job growth.
New homes are also selling about 74% below the average 1.1 million-unit annual rate recorded during the 2002 to 2007 housing bubble, but almost no economist expects the U.S. to return to that lofty, problematic-mortgage-fueled level, due to more modest gains in household formation, among other factors.
New-home sales did rise for the month, which is encouraging, given that November is a period when many builders taper activity due to the arrival of colder weather. But the gain was less than what economists were looking for. The nation will need adequate job growth of at least 125,000 to 150,000 new jobs per month to both reduce high new home inventories and give potential buyers confidence that their new residences won't decrease in value soon after they're bought.