New home sales increase for the second month
Single-family home sales rose by nearly 6% in November over the previous month. But the number was far below 2021.
- New home sales were reported to be 640,000, up from 605,000 in October.
- But sales are down from a year ago, and there is a much larger inventory on the market.
- Buyers are having a harder time affording a home with higher costs from inflation and mortgage rates double what they were a year ago.
New home sales in November increased for the second straight month as borrowing costs continued to soften and the Fed slowed the pace of its inflation-busting rate hikes.
Sales last month rose 5.8% to a seasonally adjusted rate of 640,000, the U.S. Census Bureau reported. The number of reported new home sales tops the revised October figure of 605,000.
(New home sales figures for October were revised to 605,000 from 632,000, the Census Bureau reported. November's data has a margin of error of more than 22%.)
New home sales are represented by signed contracts between the buyer and homebuilder. They do not take into account the difference in sales that actually close. Homebuilders have been reporting more cancellations as the cost to borrow money for a home loan has gone up.
New home sales far below a year ago
New home sales reported for November lagged last year's estimate of 756,000 by more than 15%. That has resulted in a larger inventory of new homes for sale.
The supply of new homes for sale was up by 75% over a year ago, the National Association of Home Builders said. The inventory is estimated to be 461,000, for an 8.6 months' supply of homes.
The number of new homes on the market in November was slightly lower than October's figure, when there was an 8.9 months' supply, according to the Census Bureau.
"Despite the modest uptick in contracts signed on new homes, the housing market remains in a lull, a pattern that likely will continue as we head into January," said Bright MLS chief economist Lisa Sturtevant.
"With mortgage rates sliding, it is likely that there will be more traffic as we head into spring. However, new home builders will face more competition from existing homes as inventory continues to rise," Sturtevant said.
Bringing new buyers to the market
More potential buyers are having a harder time affording a home with higher costs from inflation and mortgage rates at more than 6%. In November, the median sales price for a single family home was $471,200, the Census Bureau reported.
But an increase in loan limits next year by Fannie Mae and Freddie Mac is expected to bring more homebuyers to the market, the John Burns Real Estate Consulting Group reported. Every major metropolitan market will get at least a $51,000 loan limit increase in 2023, the company said.
"These are massive increases, and we expect these increased loan limits to have a positive impact on new home sales, beginning with home sales contracts right now, and home closings next year," the company said in an analysis of the loan's potential impact on lagging sales.