Purchases surge in the South; prices continue to rise, data show
By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — Sales of new homes shot up 4.4% in November to a two-and-a-half-year high, Commerce Department data showed Thursday.
It marks yet another sign that the ongoing recovery in the nation’s housing market is solidifying. Sales of new homes are 15.3% higher compared to 12 months ago.
Sales of new homes rose to an annual rate of 377,000 last month, the highest level since April 2010. Economists polled by MarketWatch had forecast new home sales to rise to a seasonally adjusted 380,000.
Buyers were especially active in the South, where November’s sales leapt 21.1%. The South is by far the strongest region for new-home sales.
Sales also rose in the Northeast, up 12.5%, but fell by 17.8% in the West and by 12.5% in the Midwest.
What’s driving the improvement in sales is a steady if slow recovery in the economy, a gradual increase in hiring, and rock-bottom mortgage rates. More people can afford to buy a home compared to a few years ago.
Pent-up demand is another major cause. Many people who put off a purchase during and after the 2007-2009 recession are jumping in, spurred in some cases by a spike in home prices. They want to buy before prices go any higher.
Indeed, the median price of new homes climbed 3.7% to $246,200 last month from $237,500 in October. Seasonally adjusted prices are 14.9% higher compared to one year ago.
Prices of new and previously owned homes have been escalating since the early spring owing to higher demand and a shortage of available housing. The number of homes for sale stands at multiyear lows, though builders are starting to ramp up construction.
By contrast, sales totaled just 306,000 in 2011, the fewest recorded by the government since it started keeping track in 1963.
The sale of new homes, however, is still well below pre-recession levels and falls far short of what analysts would expect in a normal economy.
In the boom years before the recession, new-home sales reached as high as 1.28 million annually. If the economy were fully recovered, analysts say, sales of new homes could top 1.5 million a year because of all the pent-up demand.
If that level of demand materializes, builders will have to sharply boost construction. The supply of new homes available for purchase on the U.S. market dropped to 4.7 months at the current sales pace from 4.9 months in October because of the rush of new buyers.
The low level of inventory, combined with growing demand, has already encouraged builders to seek more permits for new construction.
Jeffry Bartash is a reporter for MarketWatch in Washington.
