WASHINGTON – Sales of new U.S. homes fell in November, evidence that recent job gains have yet to boost the housing sector.
The Commerce Department said Tuesday that new home sales slid 1.6 per cent last month to a seasonally adjusted annual rate of 438,000, the second straight monthly decline. October sales fell 2.2 per cent to a downwardly revised rate of 445,000.
“Soft November new-home sales are consistent with what has been a slow and choppy recovery in the housing sector,” said Jesse Hurwtiz, an analyst at the bank Barclays.
The construction market has been sluggish in 2014 and continues to lag the broader economic recovery that began more than five years ago. Just 399,000 new homes were bought in the first 11 months of the year, a slight 0.2 per cent improvement from the same period in 2013.
New-home sales remain significantly below the annual rate of 700,000 seen during the 1990s.
Too many Americans lack the savings and solid credit records to upgrade to a newly built home. Or, they still owe more on their current mortgage than their home is worth.
Despite steady price gains in recent years, roughly 8.7 million homeowners remain “underwater” on their mortgages. The continued decrease in underwater borrowers should eventually cause the number of listings and homes sold to increase.
The median price for a home sold in November was $280,900, a modest 1.37 per cent increase over the past 12 months. That pales with the 5 per cent year-over-year increase in prices of existing homes bought last month, according to the National Association of Realtors.
Purchases plunged 12 per cent in the Northeast last month, while sales also skidded in the Midwest and South. Home-buying increased 14.8 per cent in the West.
Even though sales have barely budged, the supply of newly-built homes on the market has risen 15 per cent over the past 12 months to 213,000.
Rising prices and essentially flat incomes have cut into affordability for would-be buyers. The heavy snows that ushered in 2014 curbed buying activity and sales never quite recovered once the weather warmed.
Nor have sales been boosted as average 30-year mortgage rates have hovered below 4 per cent for the past few months. Mortgage firm Freddie Mac reported last week that rates were averaging 3.8 per cent, the lowest level since May 2013.
Sales of existing homes fell 6.1 per cent to a seasonally adjusted annual rate of 4.93 million, the National Association of Realtors said Monday.
Strong hiring over the past year should also encourage sales. The unemployment rate has fallen to 5.8 per cent, from 7 per cent 12 months ago, gains that could over the next year cause pay to rise at a faster pace than inflation. That would put more people in a better position to buy.