New-Home Sales Plunge in the West

Sales of new homes fell sharply in November, the Commerce Department said Thursday, with much of the drop occurring in the West -- providing another sign that the sizzling Southern California housing market is cooling.

The 28% drop in sales of new single-family houses in the 13-state Western region was the steepest monthly percentage decline in 22 years, after a record sales month in October, the agency said.

Nationwide, sales fell 12% to a seasonally adjusted annual rate of 1.13 million units, the biggest monthly setback in more than a decade. Home builders’ stock prices fell in response.

“The housing market is losing some of its momentum,” said Keitaro Matsuda, senior economist at Union Bank of California. With the prospect of higher interest rates ahead, “the long-term trend is not necessarily positive.”

The downbeat sales numbers followed last week’s government report of a 13% drop in housing starts nationwide in November, the sharpest percentage decline in 11 years.

Surprised by the size of the decline, economists couldn’t pinpoint one cause. Some noted that October’s record pace simply couldn’t be maintained; others said concern about mortgage rates probably chilled some sales. Cold and wet weather in many parts of the nation also was a contributor, they said.

They cautioned that one month’s figures don’t make a trend. November sales typically fall off from October and monthly reports often are later revised.

Moreover, despite concerns about weakness, the Southern California and national markets for both new and existing houses remain strong, analysts said. Indeed, November sales of new homes in the West -- which fell to a seasonally adjusted annual rate of 321,000 units from 445,000 in October -- were little changed from a year ago.

At KB Home, a big Los Angeles-based home builder, the government’s sales report “is inconsistent with what we’re experiencing as a company,” said Jeffrey Mezger, KB’s chief operating officer.

In its fiscal fourth quarter ended Nov. 30, KB’s orders for new housing jumped 28% from a year earlier, he said. “And we were up in all regions across the country where we operate,” Mezger said.

Nationwide new-home sales, which account for about 15% of the U.S. residential real estate market, also remain on track to set another record this year, at nearly 1.2 million units.

The November dip “may be reversed by gains in December,” economists at Moody’s Investors Service said in a note to clients. One reason: A “pickup in [mortgage] purchase applications in late November and early December.”

But the red-hot growth of the Southern California market, illustrated by record-high prices and a dearth of available properties, does appear to be throttling back, some real estate executives and analysts said.

“Buyers are still out there, and it’s still an active market,” said David Toyama, who heads a Coldwell Banker real estate business in Eagle Rock. But houses are taking longer to sell and “buyers are having more choices now,” he said.

Toyama also said Southern California’s sky-high prices were finally giving buyers pause.

In November, the median home price in Southern California soared 24% from a year earlier to a record $415,000, according to research firm DataQuick Information Systems. The median is the price at which half the houses sold for more and half for less.

Nationwide, the median fell to $206,300 in November from $224,700 the previous month, the Commerce Department said Thursday.

The housing market’s run-up has been fueled in large part by mortgage rates that have stayed relatively low even though the Federal Reserve has raised short-term interest rates five times this year.

As of Wednesday, the national rate on a 30-year fixed mortgage was 5.75%, down from 6.08% in late July, according to Freddie Mac, a major purchaser of home loans. The rate on one-year adjustable-rate mortgages was 4.17%, unchanged from five months ago.

The central bank’s raising of short-term rates is fueling concern that long-term mortgage rates are headed up, not down.

“There is a growing perception out there that this won’t last forever, as far as low interest rates are concerned,” said Paul Britton, owner of Prudential California Realty in La Mirada.

If anything, he said, that perception is giving buyers and sellers a sense of urgency to close a deal.

Two other agency reports Thursday indicated the U.S. economy remains on a modest growth track, analysts said.

Consumer spending edged up 0.2% in November after climbing a revised 0.8% in October. Also, orders to U.S. factories for big-ticket manufactured goods bounced back last month, rising 1.6% after a 0.9% decline in October, the Commerce Department said.

Among Southern California home-building stocks, KB Home stock fell $2.06 to $101.75 a share, Lennar Corp. lost 42 cents to $54.97, and D.R. Horton Inc. dropped 38 cents to $39.81 a share. All trade on the New York Stock Exchange.