21 July 2019

U.S. New Home Sales Fall in November

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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.

Click hereto access the full article on The Wall Street Journal. 

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