New-home sales fell for the second straight month in
November, pointing to underlying weakness in the housing market despite
ultralow interest rates and sturdy economic growth. Sales of newly built
single-family homes dropped 1.6% in November from a month earlier to a
seasonally adjusted rate of 438,000, the Commerce Department said Tuesday.
Sales were down by the same rate over the prior 12 months.
New homes are only a 10th of the overall housing market and
the data are subject to big revisions. But the report came a day after a major
industry group reported that existing-home sales—the bulk of the market—also
fell in November, hitting a six-month low.
The weakness in housing is puzzling given that the broader
U.S. economy is, by several measures, posting its strongest growth in years.
The government reported Tuesday the nation’s gross domestic product grew at a
5% annual rate in the third quarter, the fastest pace in 11 years. Other
economists said home sales are bound to pick up over the next year as more
Americans get jobs and their incomes grow. But several factors might impede a
stronger housing recovery.
Home prices rose quickly in recent years, driven in part by
all-cash purchases from investors, who are now retreating from the market. Many
ordinary Americans might find today’s prices unaffordable.
Federal Reserve Chairwoman Janet Yellen pointed
last week to tight lending standards as another culprit, saying she believes
many Americans who lack clean credit histories can’t obtain loans. Mortgage
rates remain near historic lows, which in theory should entice more Americans
to buy. After rising last year, the average 30-year fixed-rate mortgage has
again slipped below 4%, according to Freddie Mac.
Tuesday’s report showed the stock of new homes for sale
built up. At the November selling pace, it would take 5.8 months to exhaust the
supply of newly built homes on the market. The price of the typical home has
climbed. The median price of a newly built home stood at $280,900 in November,
up from $277,100 a year earlier.
November is a slow month for new-home sales as builders
focus most of their attention on completing pending home sales before the end
of the year rather than signing new contracts. The month traditionally ranks
11th in contract volume, ahead of only December, according to the National
Association of Home Builders.
Even so, several builders reported an increase in contract
volume in November, with some citing the slowly improving economy and
increasing consumer confidence. Luxury builder Toll Brothers Inc.
reported a 16% increase in contracts in November and the first half of December
from the same period of last year, following a 10% gain for its fiscal quarter ended
Oct. 31.
Taylor Morrison Home Corp., which operates in five states,
reported that its sales in October and November were up a heady 30% from the
same period a year earlier. In Riverview, Fla., Willy Nunn, president and
principal of closely held builder Homes by WestBay, described himself as
“cautiously optimistic about the spring” after WestBay sold 30 houses in
November. That’s up from 18 in October and 12 in November 2013. Mr. Nunn
speculated that buyers felt less anxiety about the economy and world events
after the negative campaigning of the election season ended in early November.
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