Purchases of new homes unexpectedly declined in November to a four-month low, underscoring a lack of momentum this year in residential real estate.
Sales dropped 1.6% to a 438,000 annualized pace last month following a 445,000 rate in October that was weaker than previously estimated, Commerce Department figures showed today in Washington. The median estimate of 73 economists surveyed by Bloomberg called for a 460,000 pace in November.
Strict bank lending standards and rising property prices have bridled the industry this year following a pickup in 2013. Further growth in employment opportunities and persistently low borrowing costs may help provide a spark for the housing market in 2015.
Housing “will get back in tune in 2015 with these continued low mortgage rates and more job growth,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, whose forecast for a sales pace of 440,000 was the closest in the Bloomberg survey. “I don’t see any fundamental weakening going on here, it’s just more of the very slow back-and-forth in housing improvement.”
Another report from the Commerce Department showed more income is being generated as the job market improves. In November, personal income climbed 0.4%, the most in five months. Household spending accelerated as well.
Economists’ estimates ranged from a November sales rate of 425,000 to 480,000 after a previously reported 458,000 pace in October.
New-home purchases were down 3.7% from November 2013 on an unadjusted basis, today’s report showed. The median price of a new home increased 1.4% last month from a year ago to $280,900.
Purchases decreased in three of four regions in November, with a 12% slump in the Northeast and a 6.4% decline in the South. Sales fell 6.3% in the Midwest and rose 14.8% in the West.
The supply of homes at the current sales rate increased to 5.8 months from 5.7 months in October. There were 213,000 new houses on the market at the end of November, the most since May 2010 and up from 210,000 a month earlier.
Sales of new properties, which are tallied when purchase contracts are signed, are considered a more timely measure of the market than sales of previously owned dwellings, which are counted when a sale is final.
Purchases existing homes fell 6.1% to a 4.93 million annual rate last month, the weakest since May, from a 5.25 million pace in October, figures from the National Association of Realtors showed yesterday in Washington. Meanwhile prices continued to rise, with the median value increasing 5% from a year earlier to $205,300 last month.
That may make it harder for low-income and first-time buyers to enter the market, even with mortgage rates at the lowest levels since May 2013.
The average rate for a 30-year fixed mortgage was 3.8% in the week ended Dec. 18, according to Freddie Mac. Thats the lowest level since then-Fed Chair Ben Bernanke signaled that the central bank could start to slow its monthly pace of bond purchases if the economy showed sustained gains, setting off an increase in interest rates.