The numbers: New-build home sales occurred at a seasonally adjusted annual rate of 841,000 in November, the Census Bureau reported Wednesday. That was 11% below the downwardly revised rate of 945,000 in October.
Analysts polled by MarketWatch had predicted that new home sales would occur at a seasonally adjusted annual rate of 875,000. Compared to last year, however, the numbers remained high, at almost 21% year-on-year.
What happened: New home sales fell in all parts of the country, led by a 43% decline in the Midwest.
The stock rose significantly at the end of the month, up about 14% to a 4.1 month stock. A six-month housing supply is generally considered to be an indication of a balanced market. The median price of new homes for sale was $ 335,300, down from October but 5% more than a year ago.
The big picture: The dip in sales in November is a sign that buyers are cooling off in the market, along with the cooler weather. “While buyers continue to prefer larger homes with larger backyards and a better quality of life, soaring prices are driving a wedge between their preferences and their wallets,” said George Ratiu, senior economist at Realtor.com.
Indeed, the rising cost of new homes points to the challenges buyers will face as we enter the new year. The increase in the sales prices of new-build homes is mainly a reflection of higher construction costs. Nevertheless, with the supply of existing homes so limited, buyers will face stiff competition for most properties, driving prices up.
Builders face a challenge in 2021: there is a lot of demand for more affordable homes, but those homes offer less returns for construction companies. “New home builders have to deal with rising construction costs and changing consumer preferences to increase the availability of affordable new homes,” said Ratiu.
What they say: “Stocks are tight – falling 14.2% year-on-year in October – and could be a barrier to home sales in the future,” said Rubeela Farooqi, chief US economist at High Frequency Economics, in a research note .
Market reaction: Market Response: The Dow Jones Industrial Average DJIA,
and S&P SPX,
There was Wednesday, despite confusion over the fate of the latest stimulus package …
Meanwhile, shares of housing companies PulteGroup PHM,
LGI Homes LGIH,
and Lennar Corp. LEN,
were all down more than 2% after the release of the new home sales report.