New Home Sales Slip from 5-Year Peak as Prices Rise

new home sales
George Frey/Getty Images
By MARTIN CRUTSINGER

WASHINGTON -- Sales of new homes slipped slightly in November after a big surge the previous month. The figures add to evidence that the housing market may be struggling to sustain the pace of its recovery.

Sales fell 2.1 percent in November to a seasonally adjusted annual rate of 464,000, the Commerce Department said Tuesday. In October, new-home sales had shot up 17.6 percent, the biggest monthly gain in more two decades. October's annual sales pace of 474,000 was the highest since July 2008.

The annual pace of new-home sales remains well below the 700,000 generally consistent with a healthy market.

Before the rebound in October, home sales had slowed over the summer. They did so after mortgage rates spiked amid investor concerns about how fast the Federal Reserve would remove its support for the economy.

Still, analysts noted that the slight drop in November sales followed a surge in October, with some signs suggesting further gains.

"The housing recovery remains well in place," said Mark Vitner, senior economist at Wells Fargo.

He noted that mortgage rates are still low by historic standards and should support sales next year.
Vitner predicted that new-home sales would rise next year to an annual pace of around 530,000.

In a separate report, the Mortgage Bankers Association said the number of Americans applying for mortgages fell 6.3 percent last week from the previous week. Applications have reached a 13-year low, down 63 percent from their May peak.

Much of the decline reflects a drop-off in refinancings as rates have risen. The average for the 30-year mortgage was 4.47 percent last week, up nearly a full percentage point from last spring.

In November, sales of new homes dropped 26.6 percent in the Midwest and 9.1 percent in the South. Sales rose 31.1 percent in the West and 15.2 percent in the Northeast.

The median price of a new home sold in November rose to $270,900, up 10.6 percent from a year ago.

There were 167,000 new homes on the market at the end of November, a drop of 6.7 percent from the October inventory. That would translate into a tight supply of 4.3 months at the November sales pace.

Mortgage rates began rising in May after the Fed first signaled that it might slow its $85 billion in monthly bond purchases. But rates have declined a bit after peaking at 4.6 percent in August.

The National Association of Realtors said last week that the number of people who bought existing homes in November fell for a third straight month. The lingering effects of the partial government shutdown in October might have deterred some sales.

Still, the government said builders broke ground on homes at a seasonally adjusted annual rate of 1.09 million homes and apartments in November. That was the fastest pace since February 2008 and was 23 percent higher than in October.

The Fed announced last week that it will begin in January its long-anticipated move to trim its monthly bond purchases. The Fed said it would cut the $85 billion in purchases it has been making by a modest $10 billion. It indicated that further cuts would take place in coming months if the economy keeps improving.

Long-term rates could head up after the Fed pulls back on its bond buying.


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Valerie

The average buyer has only one question when they go shopping for any big-ticket purchase, including a house. That is: "How much is my payment going to be?" ( Anyone, who would actually sign up for a 50-year home mortgage, has to be out of their mind.)

People also fail to realize that there are a lot of ongoing satellite expenses connected with home ownership. It is no exaggeration to say that a homeowner can find something to fix and/or repair every weekend. There is also no ceiling on annual property taxes.

Then, there is grass that needs mowing, landscaping to maintain, the costs of water and sewer service, trash removal, a new roof at some point in time. Appliances don't last nearly as long as they used to. Interior and exterior painting. And other fun stuff like dry rot, termite damage and other insect infestations.

And heaven help you, if you have the bad luck to have your house damaged by a weather-related event, etc. (Did you know that earthquake damage is NOT covered under your homeowner's insurance policy?? Neither is flood damage, or a lot of other things.)

Homeowners just love to sit around and say: "Renters are just throwing their money away." But, home ownership is not a slam-dunk moneymaker. The housing industry has done a terrific job of selling home buying as the American Dream. But that dream can easily turn sour. Especially, if your worst nightmare moves in next door.

December 24 2013 at 5:45 PM Report abuse rate up rate down Reply
derealest

Oops FED policies fueling another little bubble? The sales reported over the summer reflected an active market as people bought a payment........not the value of the property. The first principal you are taught in Real Estate is the concept of supply and demand. As interest rates rise, the prices HAVE to come down to meet the payment needs of the buyers. As soon as the interest rates went up I warned my clients of this situation and told them that they should not be surprised if their property values not increasing much over the next few years. When Government steps in and creates a false economy for ANY reason it will usually backfire. Be careful. The march to a "progressive utopia" will leave many victims in the wake. The last housing "bubble" which hurt so many Americans was a result of the push to loan money to anyone to buy real estate. Great Idea, bad result. We NEVER had a term called "sub-prime loans" prior to the debacle forced down the banks by the "progressives". We NEVER saw a reduction of net worth so vast EVER. We are still dealing with foreclosures and short sales in abundance. The progressive ideal will consume everything in it's path including you. They do not care about your success, they care about their success. It has to stop. Time to man up. Make huge sacrifices from EVERYONE. Or we will lose all of what made this country so special. So envied, so successful. Now so mediocre, so stifled, so weak. Merry Christmas. Good luck.

December 24 2013 at 12:31 PM Report abuse +1 rate up rate down Reply
1 reply to derealest's comment
George

I would agree--people are buying a monthly payment, not a properly valued property. Thanks to politicians who accepted payoffs from banking to unleash them from Glass-Steagall and the Greenspan-Bernanke era of jacking asset values via low interest rates, we are not going to see reduced values. Wouldn't be surprised to see 40 or 50 year mortgages to keep the monthly payments down---which will encourage more asset bubble valuations! The whole world will do this because no other choice that is politically palatable.

December 24 2013 at 2:10 PM Report abuse +1 rate up rate down Reply