US new home sales slump 11.3 percent

[GoFlyKiteNow]

US new home sales slump 11.3 percent

Sales of new US homes slid 11.3 percent in November to their lowest level since April, according to government data Wednesday highlighting volatility in the fragile housing market.

The Commerce Department said sales plunged to a seasonally adjusted annual pace of 355,000 from a downwardly revised 400,000 in October.The figure was far below analyst expectations for a pace of 440,000 new home sales, but some said the figure may have been skewed by a tax credit for some buyers that was due to expire in November.

The report dampened optimism about a rebound in the critical housing sector, which had risen after data Tuesday showing a 7.4 percent rise in the larger market for existing home sales.The latest report also showed an ongoing glut of unsold homes and a mixed picture for prices.

The inventory of new homes fell slightly to 235,000 from 240,000 a month earlier. But because of a slower sales pace, this represented a rise to 7.9 months in the stock of unsold homes, from 7.2 percent.The median price rose 8,000 dollars from October to 217,400 dollars and the average price increased 18 percent to 280,300. But on a year-over-year basis, median prices were down around two percent and average prices off three percent.

Michael Zoller at Moody's Economy.com said the surprisingly weak report negates several months of gains. But he said the figures may have been skewed by a government tax credit set to expire in November before Congress extended and expanded it."Those who were considering contracting a new home in November would have been unable to meet the November 30 deadline in order to claim the tax credit," he said.

"Though the tax credit was extended and expanded, November buyers had no way of knowing in advance that their sales would qualify. This month may therefore be an anomaly, and an increase in new home sales in December would not be shocking."

Although new home sales represents a smaller segment of the real estate market than existing homes, the pace of sales and inventories affects construction, which is significant for economic activity.

Ian Shepherdson at High Frequency Economics said Wednesday's report "tells us nothing at all about the future."

"We expect sales to rise sharply next year, not the least because eligibility for the tax credit has been broadened to include most homebuyers, not just first-time buyers," he said."Homes are now very affordable... and inventory is well down from its peak." bur-rl/pp

 

[longbow]

Why buy new home when banks and lots of repo homes and are willing to do deals - especially since Feds have been giving banks sweetners as well as pressure to do deals.

On the plus side, consumer spending is up and critical US Christmas sales is up.

Road ahead is still rocky but consumers are feeling more confident as unemployment figures drop.


Sales of new homes in the US plunged unexpectedly in November, official figures showed, as buyers favoured distressed and foreclosed properties.

Separately on Wednesday, personal incomes in the US recorded their biggest gains in six months in November as the labour market began to improve and consumer spending continued to thaw.
EDITOR’S CHOICE
US economic growth revised down - Dec-22 Obama asks regional banks to up lending - Dec-22New home sales dropped by 11.3 per cent to an adjusted annual rate of 355,000, commerce department figures showed. That was the lowest level in seven months and defied expectations of a rise.

Compared with a year ago, sales of new homes are off by 9 per cent.

The disappointing housing data shows how sales of existing homes, which rose last month, have cannibalised new home sales. The figures also showed the impact of expectations that the first-time home buyer tax credit would expire in November. It was eventually extended into next year.

“It is important to understand that the earlier recovery was in part a product of the tax incentive, which is now slated to go away at the end of April,” said Joshua Shapiro, chief US economist at MFR. “It would appear that weaning housing from the government’s teat is going to be a difficult process.”

Home sales were hit the hardest in the south, where they fell by 21.1 per cent. They fell by 9.2 per cent in the west, 3.3 per cent in the northeast, but rose by 21.4 per cent in the midwest.

A bright note on Wednesday was that the median price of a new home in the US rose by 3.82 per cent to $217,400 from October to November. That was clouded, however, by a rise in housing inventory, which rose to a 9.5-months-supply at the current sales rate.

Meanwhile, incomes rose by 0.4 per cent to $49.7bn in November, silghtly behind economists’ expectations but stronger than the prior month, according to commerce department figures. Workers benefited from the slowing pace of lay-offs and employers who began to increase their hours.

Personal consumption expenditure also continued to climb, rising by 0.5 per cent, as holiday discounts succeeded in luring shoppers. Consumer spending has risen in six of the past seven months.

With spending and incomes tracking each other closely, the savings rate held steady at 4.7 per cent in November.

“There is no evidence that the consumer is seeking to ramp the savings rate higher and we attribute this to the recovery in equity prices and the stabilisation in home prices, which has restored a degree of wealth cushion to US households,” said John Ryding and Conrad DeQuadros, economists at RDQ Economics.

Consumer spending accounts for about 70 per cent of economic activity in the US. On Tuesday, revised government figures showed that the US economy had grown at an adjusted annual rate of 2.2 per cent in the latest quarter. Analysts forecast that gross domestic product could grow by more than 4 per cent if consumer spending keeps rising at this rate.

The commerce department’s core price index, a key measure of inflation, was flat in November, signalling that rising prices are not an imminent concern.
Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the w