New-Home Sales at Highest Rate Since ’86

Sales of new homes surged in November to their highest rate in nearly 12 years as the supply of unsold homes fell to its lowest level in more than 26 years, the Commerce Department said Wednesday.

The department said sales of new, single-family homes jumped 5.1%--the biggest increase in a year--to a seasonally adjusted annual rate of 830,000 units, the strongest pace since April 1986. It also revised the October rate down to 790,000 units from the originally estimated 797,000 units.

The unexpectedly strong rise in home sales helped to temporarily soften prices of U.S. bonds. Traders said the market was more focused on the economic crisis in Asia and Friday’s release of U.S. employment data for December.

“The data was pretty much ignored,” Lee Youngdahl of Aubrey G. Lanston in New York told Reuters Financial Television.

The surge exceeded the expectations of Wall Street analysts, who had predicted a sales pace of 806,000 units in November. They said the housing market is benefiting from solid consumer confidence levels and declining mortgage rates, which are hovering near the 7% mark for 30-year, fixed-rate loans.

The Commerce Department said the supply of unsold homes fell to 4.2 months’ worth, based on current sales rates, the smallest inventory of new homes on that basis since July 1971. There were 4.4 months’ worth of unsold homes in October, it said.

Regionally, sales soared 23.4% in the Northeast, 14.9% in the Midwest and 4.9% in the South. In the West, sales fell 6.3%.

An economist for the National Assn. of Home Builders in Washington said the sales dip in the West was simply a temporary blip on the screen and not a sign that growth in the area is slowing.

“We don’t see any indication that the market is weakening in the West,” said economist Michael Carliner. “We think it will likely bounce back in the next month.”

In fact, Carliner said, new-home sales were up 2.5% in the first eleven months of 1997, to 203,000 from 198,000 in the same period last year. Leading the way, he said, was California, one of the last states to recover from the housing crunch of the early 1990s.