November New Home Sales Off 8% : Northeast Hardest Hit; Decline the Largest in 18 Months
Sales of new homes, hurt by a big slump in activity in the Northeast, declined by 8% in November, the largest setback in 18 months, the government reported Friday.
The Commerce Department said that new single-family homes were sold at a seasonally adjusted annual rate of 671,000 units last month, down from a revised October sales rate of 729,000 units.
The November decline was the second in the past three months and the sharpest since an 11.6% decrease in May, 1987. Sales had risen 4.4% in October.
While three of the four regions of the country showed sales declines from October to November, the biggest by far was a 27.3% plunge in sales in the Northeast.
David Seiders, chief economist of the National Assn. of Home Builders, said the latest decline reflected a further cooling off of the Northeast market, which had been the hottest sales area for the past several years.
“An awful lot of weakness has developed in the Northeast market, while the West has been surging,” Seiders said. “For the first 11 months of the year, we have seen about a 15% decline in the Northeast, compared to the same period a year ago, while sales in the West are up by about 10%.”
The regional cross-currents have resulted in total sales nationally holding essentially unchanged from the 1987 level of 671,000 new homes sold.
However, Seiders predicted that new home sales would drop by about 6% in 1989, reflecting slower economic growth and higher mortgage rates.
He predicted that mortgage rates could rise as high as 12% by mid-year.
The Federal Home Loan Mortgage Corp. reported Friday that rates rose to 10.77% in the week just ending, up from 10.68% a week ago, and the highest level since early November, 1987.
Richard Peach, senior economist of the Mortgage Bankers Assn., also predicted mortgage rates would continue rising, but he said the fact that existing home sales showed an increase in November should be viewed as a good sign that the bottom is not falling out of the housing market.
“The numbers this month suggest that some buyers are switching from new homes to existing homes, particularly in the Northeast, because they believe they represent a better value,” Peach said.
The decline in sales was accompanied by a drop in prices. The median price of a new home fell 4.2% to $110,200 in November. The average price was down as well, declining by 0.8% to $138,900.
In addition to the Northeast, sales were off 7.5% in the South to a rate of 245,000 units and down 6.8% in the West to a rate of 233,000 units.
The Midwest was the only region of the country to enjoy a rise in sales in November, a 5.2% increase to an annual rate of 121,000 units. This region is currently benefiting from a rebounding economy as the area’s manufacturing industries enjoy rising demand from a boom in U.S. exports.
