Sales of New Residential Homes Reaches Two-Year Peak in November

By Stevie Duffin Updated on 12/28/2012

By Daniel Duffield

In November, sales of new single-family homes reached a two-year peak, hitting the highest level since April 2010 at an adjusted annual rate of 377,000.

These new home sales averaged 4.4% above the corrected October rate of 361,000, according to a statement issued on Thursday from the U.S. Census Bureau and the Department of Housing and Urban Development (HUD).

Statistics indicated that new home sales rose 15.7% since November 2011 in which the rate was 327,000, demonstrating some progress in the recovery of the housing market.

In terms of pricing, the median price of these new homes being sold was $246,200, in comparison with $237,000 during the month of October. The mean sales price averaged $299,700.

At the close of November, the number of new homes available for sale hit 149,000, demonstrating a 4.7-month inventory of homes at the sales pace for November.

According to experts from Econoday Economic Report, the market for new homes is a good sign for the economic outlook, considering future insufficiency in terms of new construction.

The analysts additionally stated that economic issues are currently being overshadowed by the expected onset of the fiscal cliff and the potential consequences of higher taxes on consumer home purchase.

While home sales rose to new heights, consumer confidence plummeted for the second straight month due to the sluggish recovery of historically low mortgage rates coupled with the high demand in the housing market.

Economist Gregory Bird of Moody’s Analytics disagrees, saying that those who can afford homes and acquire mortgages will not be affected by the concerns of the fiscal cliff.

In December, the Consumer Confidence Index dropped from 71.5 in November to 65.1, while the Expectations Index plummeted from 80.9 in November to 66.5.

Director of economic indicators at the Conference Board Lynn Franco explains this trend as the result of the high degree of uncertainty which has been a result of the ongoing fiscal cliff talks, which have consequently led to a sharp drop in consumer expectations within December.

Consumer optimism in the short term also dropped in December.

In terms of consumer expectations, those anticipating better business conditions within the next six months declined from 21.3% to 17.6%, while those anticipating worse business conditions rose from 15.8% to 21.5%.

According to Lynn Franco, “A similar decline in expectations was experienced in August of 2011 during the debt ceiling discussions. While consumers are quite negative about the short-term outlook, they are more upbeat than last month about current business and labor market conditions."