U.S. new-home sales plummeted in November

In November, new-home sales in the United States experienced a sharp decline, as elevated mortgage rates began to impact home buyers. According to the Commerce Department, sales of newly built homes fell 12.2% to an annual rate of 590,000, significantly below the forecasted 688,000. This decline marks the lowest level of new-home sales since November 2022 and is the second consecutive month of decreased sales. The drop was primarily driven by significant declines in the South and the West regions. Despite this, the overall housing market is showing early signs of recovery, with mortgage rates falling and home-buying demand increasing. Additionally, housing starts have jumped 15% in November, indicating that builders are responding to the demand by ramping up construction on new housing units.

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Background Information

Overview of the U.S. new-home sales data for November

The U.S. new-home sales data for November revealed a significant decline in sales of newly built homes. According to the Commerce Department, new-home sales fell by 12.2% to an annual rate of 590,000 in November, compared to a revised figure of 672,000 in the previous month. This decline in sales was unexpected and below the expectations of economists on Wall Street, who had forecasted new-home sales to reach 688,000 for the month of November. It is also the lowest level of new-home sales since November 2022.

Factors contributing to the decline in new-home sales

There are several factors that have contributed to the decline in new-home sales. Firstly, elevated mortgage rates have had a negative impact on home buyers. These higher rates have limited the purchasing power of potential buyers, making it more difficult for them to afford new homes. Secondly, the South and the West regions of the U.S. experienced the biggest declines in new-home sales. This could be due to a combination of factors such as higher home prices, limited inventory, and economic challenges in these regions. Lastly, the data from October was revised, showing a smaller decline in sales than initially estimated. This revision may have also affected the November data, making the decline in new-home sales appear more significant.

Key Findings

Sales of newly built homes in the U.S. plunged 12.2% in November

The U.S. new-home sales data for November showed a significant decline of 12.2% in sales compared to the previous month. This decline was unexpected and fell short of economists’ forecasts.

The South and the West regions experienced the biggest declines in new-home sales

The data revealed that the South and the West regions of the U.S. experienced the largest declines in new-home sales. Factors such as elevated mortgage rates, higher home prices, limited inventory, and economic challenges may have contributed to this decline.

Median sales price of a new home sold in November increased

Despite the decline in sales, the median sales price of a new home sold in November actually increased. The median sales price rose to $434,700 from $414,900 in the previous month. This increase in the median sales price may reflect the limited supply of new homes for sale and the continued demand in certain regions.

Supply of new homes for sale rose

The data also revealed that the supply of new homes for sale increased by 16.5% between October and November. This equates to a 9.2-month supply of new homes. The increase in supply may indicate that builders are responding to the demand in the market, despite the decline in sales.

Overall, new-home sales are up 1.4% compared to last year

Although new-home sales experienced a significant decline in November, when compared to the previous year, overall sales are still up 1.4%. This suggests that the housing market is still experiencing some growth, albeit at a slower pace.

Analysis of the Decline in New-Home Sales

Impact of elevated mortgage rates on home buyers

One of the key factors contributing to the decline in new-home sales is the impact of elevated mortgage rates on home buyers. Higher mortgage rates increase the cost of borrowing, making it more expensive for potential buyers to purchase a new home. This limits their purchasing power and may deter them from entering the housing market altogether.

Comparison to expectations on Wall Street

The decline in new-home sales in November was below the expectations of economists on Wall Street. These experts had forecasted new-home sales to reach 688,000 for the month, but the actual figure fell far short at 590,000. This disparity between expectations and reality may be an indication of the challenges facing the housing market and the broader economy.

Revision of data from October

The revision of data from October also played a role in the decline in new-home sales in November. The revised data showed a smaller decline in sales than initially estimated, which may have affected the perception of the market and contributed to the larger decline in November. This highlights the volatility of new-home sales data and the importance of accounting for revisions in analysis.

Key Details of the New-Home Sales Data

Median sales price of new homes in November

The median sales price of a new home sold in November increased to $434,700 from $414,900 in the previous month. This increase in the median sales price may reflect the limited supply of new homes for sale and the continued demand in certain regions.

Supply of new homes for sale in November by region

The supply of new homes for sale increased by 16.5% between October and November. This equates to a 9.2-month supply of new homes. It is worth noting that the supply of new homes varied by region, with half of the nation reporting an increase in new-home sales. The Midwest posted the biggest gains at 25%, followed by the Northeast at 3.1%. However, sales fell in the South by 20.9% and in the West by 5.1%.

Comparison of new-home sales to last year

Despite the decline in new-home sales in November, overall sales are up 1.4% compared to the previous year. This suggests that while there may be short-term challenges affecting the housing market, there is still growth and potential for recovery in the long term.

Big Picture and Future Trends

Interpretation of the decline in new-home sales

The decline in new-home sales in November may be seen as a temporary setback in the housing market. Housing data can be noisy and fluctuations in sales are not uncommon. It is important to consider the broader economic and market conditions when interpreting this decline, as well as the potential for future trends.

Potential recovery signs in the housing market

Despite the decline in sales, there are early signs of recovery in the housing market. Mortgage rates have fallen significantly in December, making homeownership more affordable and increasing home-buying demand. This, coupled with the limited supply of resale inventory, puts home builders in a strong position to meet increasing buyer demand. Housing starts have already shown a significant jump of 15% in November, indicating that builders are responding to this demand by ramping up construction on new housing units.

Predicted future decrease in mortgage rates and its impact on the market

Economists predict a further decrease in mortgage rates, which would have a positive impact on the housing market. Lower mortgage rates would make homeownership even more affordable and could incentivize more buyers to enter the market. This potential decrease in rates could help offset some of the challenges currently facing the housing market and contribute to a recovery in new-home sales.

Increase in housing starts as a response to buyer demand

The significant increase in housing starts in November indicates that builders are recognizing the demand in the market and responding accordingly. By increasing the construction of new housing units, builders can help address the limited supply of resale inventory and provide buyers with more options in the market. This increase in housing starts is a positive sign for the future of the housing market and suggests that there is potential for growth and recovery.

Expert Analysis

Insight from analysts at Raymond James

Analysts at Raymond James provided insight into the decline in new-home sales, particularly in the South region. They noted that the significant decline in new-home sales in the South drove the overall decline in November. This decline was the largest month-over-month decline since April of 2022. This analysis highlights the regional variations in the housing market and the specific factors that can have a significant impact on sales.

Comparison to previous declines in new-home sales

When comparing the decline in new-home sales in November to previous declines, it is important to consider the context and the specific factors at play. Each decline may have unique causes and implications for the housing market. By studying these previous declines, experts can gain a better understanding of the current situation and make more accurate predictions for the future.

Market Reaction

Stock market performance in response to the news

In response to the news of the decline in new-home sales, the stock market showed mixed performance. Stocks DJIA SPX were up in early trading on Friday, indicating some resilience in the face of the decline. However, the volatility of the market should be closely monitored as it may respond further as the news is digested and analyzed.

Stock prices of home builders in the morning trading session

The stock prices of home builders, including D.R. Horton Inc., Lennar Corp., PulteGroup Inc., and Toll Brothers Inc., were up in the morning trading session. This suggests that investors have positive expectations for these companies in light of the decline in new-home sales. However, it is important to exercise caution and closely monitor the market, as the stock prices may fluctuate as more information becomes available.

Additional Information

Discussion of mortgage rates and its impact on buyers

To fully understand the impact of the decline in new-home sales, it is necessary to discuss mortgage rates and their impact on buyers. Elevated mortgage rates have limited the purchasing power of potential buyers, making it more difficult for them to afford new homes. This discussion can provide further context and insights into the challenges facing the housing market.

Usefulness and limitations of housing data

It is important to acknowledge the usefulness and limitations of housing data when analyzing the decline in new-home sales. Housing data can be noisy and subject to revisions, which can affect the interpretation and accuracy of the analysis. It is crucial to consider these factors when drawing conclusions and making predictions based on the data.

Importance of monitoring future trends

Given the volatility and fluctuations in the housing market, it is crucial to monitor future trends to gain a comprehensive understanding of the market’s trajectory. By closely following key indicators such as mortgage rates, housing starts, and buyer demand, experts and stakeholders can make more informed decisions and predictions about the future of the housing market.

Potential implications for the real estate market

The decline in new-home sales has implications for the broader real estate market. It can affect various sectors such as mortgage lending, construction, and home improvement. Understanding these implications is essential for stakeholders in the real estate industry to adapt their strategies and make informed decisions.

About the Author

Aarthi Swaminathan is a MarketWatch personal finance reporter. As a finance expert, she provides insights into various aspects of the economy, including the housing market. Aarthi holds a degree in finance and has years of experience in analyzing economic trends and writing about financial topics.

Sources

• Commerce Department
• Analysts at Raymond James

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