Home builder stocks tumbled today after the government said that nationwide new home sales took a nose dive in November, falling 12% from the previous month in the largest monthly drop in a decade.
The disappointing new home sales report was the exception in a mostly positive batch of economic news released today, with consumer spending edging up in November and factories reporting a larger than expected increase in orders for big-ticket items.
On Wall Street, stocks, with the notable exception of several major home builders, were modestly higher in relatively quiet holiday trading. The Dow Jones Industrial average was up about 20 points in early afternoon trading.
The larger-than-expected decline in November new home sales reported by the Commerce Department today took many industry analysts and investors by surprise. November sales fell 12% from the previous month's revised figure to a seasonally adjusted annual rate of 1.125 million homes.
Sales dropped across most of the nation, with the West posting a 27.9% decline; the Midwest suffering a 39.4% drop and Northeast reporting a 7.1% decrease. The only region to see sales rise was the South, where sales rose 13.6%.
Many analysts were reluctant to interpret the steep decline in November new home sales as a sign of widespread weakness in the housing market. Instead, some said the results reflected a moderation in sales from an unusually busy October and a wetter than normal fall in some parts of the country.
"Although new home sales fell sharply, it is out of line with the home buying fundamentals," said economist Steven Wood in a report for Insight Economics. "Mortgage rates remained below 6%, mortgage applications stayed robust, and homebuilders reported strong traffic through model homes. Consequently, this drop may be more due to temporary factors like wet weather than the beginning of a major reversal in housing."
Investors seemed less confident and sold off housing stocks today. Shares of Los Angeles-based KB Home, for example, was down more than 2% while Lennar Corp. and Pulte Corp. were both off more than 1%.
In other economic news today, the Commerce Department reported that factory orders for durable goods rose by a larger than expected 1.6% in November, rebounding from a decline the previous month.
There was also good news on the consumer front. Consumer spending — the largest source of economic growth — rose 0.3% in November from the previous month's results, which were also revised upward, according to the Commerce Department.
Personal income also rose last month, registering a 0.2% increase, according to the Commerce Department.
The University of Michigan's widely watched index of consumer sentiment rose in December from the previous month to a revised 97.1, according to people with access to the report. The December index was the highest since February.
"Assuming that the labor market recovery does not wither on the vine, that the equity market does not tank, and that oil prices to not rise significantly further, these indicators ought to stay on a generally improving longer term path," said analyst Joshua Shapio at MFR, an economic consulting firm.
In a separate report, the Labor Department said that first time claims for unemployment insurance for the week ended Dec. 18 rose 17,000 from the previous week to a seasonally adjusted 333,000 claims. The four-week moving average was 340,000, a more stable figure, increased by 2,250 claims from the previous week.