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Brian Wesbury
Chief Economist
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Bob Stein
Deputy Chief Economist
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 | New Single-Family Home Sales Declined 1.6% in November |
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| Posted Under: Data Watch • Home Sales • Housing |
Implications: It makes sense...the housing market, with all its government "help" seems to be the weakest sector of all. New single-family home sales fell 1.6% in November. This comes on the heels of yesterday's report, which showed a similar decline in existing home sales. New home sales remain at depressed levels relative to where they should be by now in the recovery and we believe there are a few key reasons for this. First, the homeownership rate remains depressed as a larger share of the population is renting. Second, buyers have shifted slightly from single-family homes, which are counted in the new home sales data, to multi-family homes (think condos in cities), which are not counted in this report. Third, although we may be starting to see a thaw, financing is still more difficult than it has been in the past. The inventory of new homes rose 3,000 in November, but still remains very low as the chart to the right shows. As a result, homebuilders still have plenty of room to increase both construction and inventories. The median sales price for a new home fell 3.2% in November but remains up 1.4% from a year ago. The decline in November was due to the "mix" of home sales in that particular month. Sales of homes over $750,000 made up 2% of sales in November, compared to 8% last month while homes priced under $200,000 accounted for 27% of sales in November, up from 22% in October. In other news this morning, the FHFA index, which focuses on homes financed with conforming mortgages, rose 0.6% in October and is up 4.5% versus a year ago. In the year that ended in October 2013, the FHFA was up 8.1%. In other words, price gains have continued in the past year but at a slower pace. We expect some further deceleration in the year ahead, as faster home building makes more supply available. In other news this morning, the Richmond Fed index, a measure of mid-Atlantic manufacturing sentiment, rose to +7 in December from +4 in November, signaling that factory activity continues to expand, and at a slightly faster pace.
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