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 dipped 2.1 per cent 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 per cent, 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 per cent last week from the previous week. Applications have reached a 13-year low, down 63 per cent 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 per cent last week, up nearly a full percentage point from last spring.
In November, sales of new homes dropped 26.6 per cent in the Midwest and 9.1 per cent in the South. Sales rose 31.1 per cent in the West and 15.2 per cent in the Northeast.
The median price of a new home sold in November rose to $270,900, up 10.6 per cent from a year ago.
There were 167,000 new homes on the market at the end of November, a drop of 6.7 per cent 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 signalled that it might slow its $85 billion in monthly bond purchases. But rates have declined a bit after peaking at 4.6 per cent 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 per cent 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.