Hopes for a strong recovery in the housing market were dealt a blow on Wednesday when the government said new home sales unexpectedly tumbled in November, taking their steepest decline since the darkest days of the recession amid uncertainty over the extension of a federal tax credit.
The Commerce Department said sales of new homes slumped 11.3% to an annualized pace of 355,000 units last month, surprising analysts who had predicted a rise of 6.2%. Further, the government lowered its estimate for October by 30,000 units to 400,000.
Supplies of new homes jumped from 7.2 months’ worth to 7.9 months.
It seems prospective home buyers were spooked by ambiguity over the extension of the federal tax credit for first-time home buyers, which happened after many contracts would have been signed.
November’s performance was a “hangover from the tax-credit-induced binge in the July thru October period," Peter Boockvar, market strategist at Miller Tabak, wrote in a note.
The surprise drop in new home sales was led by the South, which suffered a 21.1% decline. Sales in the West fell 9.2% and dropped 3.3% in the Northeast. On the other hand, new home sales in the Midwest soared 21.4%.
Meanwhile, prices continued to fall on an annual basis, with the median sales price of a new home in November sinking 1.9% to $217,400. However, prices were up 3.8% from October. - FOX Business Story
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