New home sales fall 11.3% in November
Sales of new homes in November took an 11.3% plunge, a sign of just how dependent the fragile housing recovery has become on government subsidies.
The sales drop from October points to consumer uncertainty over a first-time home buyer tax credit that was initially set to expire Nov. 30. Federal lawmakers last month extended it through April 2010 and revised it to include some buyers who already own a house.
But the extension didn’t come in time to entice purchasers to commit to entering into new-home contracts that could take weeks to close. They wanted to be sure the subsidy was firmly in place before moving forward, experts said.
Sales of new single-family homes stood at a seasonally adjusted annual rate of 355,000 units, the Commerce Department said Wednesday, a 9% drop from the same month a year earlier. The government surveys the nation’s home builders and calculates its monthly sales figures based on the number of estimated contracts signed.
The drop in new home sales stood in sharp contrast to the 7.4% month-over-month surge in sales of previously owned dwellings reported by the National Assn. of Realtors on Tuesday, an increase driven by consumers hustling to close deals on existing homes and grab the first-time subsidy before the initial deadline.
“There was a huge run-up in sales because of the tax credit and that was based on getting the sale completed by the end of November,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington.
Economists watch new home sales figures carefully to calculate when builders will begin putting shovels in the ground.
A massive job generator during the housing bubble, the construction industry was decimated in the bust. It won’t revive until sales of new homes, which have faced competition from cheap foreclosure properties, show some signs of life.
The median sale price of new homes increased 3.8% in November to $217,400 from the month before. That was a 1.9% decrease from November 2008.
The median is the point at which half the homes sold for more and half for less.
Builders had 235,000 new homes up for sale at the end of November. While that’s the lowest inventory since April 1971, it still represents nearly eight months’ supply at the current sales pace.
In the West, sales of single-family homes dropped 9.2% from the previous month to a seasonally adjusted annual rate of 79,000 units.
Congress last month extended the tax credit -- as much as $8,000 -- for first-time buyers through April 30, 2010, and expanded it to include an incentive of as much as $6,500 for some people who already own a home.
Throughout the summer and in early fall, home builders used the tax incentive as a way of enticing buyers touring model homes.
“An $8,000 gift from the federal government, that could be your entire furniture budget for your entire house,” John Burns, an Irvine economist, said in describing a typical sales pitch. “It was a great tool to get people who wanted to buy a home sometime in the future.”
The result was to stimulate the housing market in a manner similar to the way the popular “cash for clunkers” program boosted auto sales earlier this year: It got people interested in buying a home sooner than they may have otherwise.
“You just had this huge pulling forward of purchases, which in principle is the intention,” Baker said. But now “it is going to hurt the economy going forward. I think we will see substantial fall-off.”
