New home sales rebound, but growth remains slow

Demand for newly built homes for sale increased during the month of November as the housing market, and the economy as a whole, continues to show slow improvements through the end of this year.

According to the Commerce Department, the pace of new home sales nationwide in November increased 5.5 percent compared to the previous month to an annual rate of 290,000. While that rate was also 21.2 percent below the pace from November 2009, the year-ago numbers were also likely inflated by the impact of the first-time homebuyer tax credit, which was originally scheduled to expire last November before it was extended at the last minute.

"While builders continue to face a great deal of competition from short-sale and foreclosure properties, the improvement registered in new-home sales in November is a good sign," said Bob Jones, chairman of the National Association of Home Builders.

As has been seen in previous reports, regional differences were widespread. Monthly sales increases of 37.3 and 5.8 percent were seen in the West and South regions of the country, respectively, while the Northeast and Midwest – areas with more severe winter weather – saw declining sales.

As sales increased, the prices of new homes for sale also showed significant monthly gains. According to the report, the median price of new homes sold during the month was $213,000, while the average was $268,700. Both of those figures were up significantly from the previous month, with the median price increasing more than 9 percent from its October levels.

"Builders in our latest surveys have indicated that they are starting to see more buyers who are seriously considering a new-home purchase, and today's numbers showing that sales headed in the right direction in November bode well for what the future may hold," said NAHB chief economist David Crowe.

That increase in sales, along with low construction numbers, helped drive down the nation's inventory of new homes for sale to 197,000 – the first time in more than 40 years that the number has fallen below 200,000. Despite the low raw number, it still amounts to an 8.2-month supply. However, if sales pick up, there could be a sudden shortage of available properties.

Economists have continued to say that a pickup in new home sales won't really take place until jobs numbers begin to show significant improvement, which should start to take place next year.

"The sales numbers should improve during 2011," said Patrick Newport, an economist with research firm IHS Global Insight. "The economy is starting to generate new jobs. New jobs will require that new homes be built nearby."

Other reports have also pointed towards a slow improvement in the jobs market. A report last week from the Department of Labor showed that the number of workers filing for unemployment has dropped by 3,000 last week to 420,000 – the second-lowest level of the year. In addition, the four-week moving average – a less volatile measurement – rose slightly to 426,000 during the week, but remained near low levels last seen in 2008.

"We have a labor market that is gradually on the mend," Nariman Behravesh, chief economist at IHS, told Bloomberg. "It's still going to be a long haul."

The slow pace of that recovery can be seen in the national unemployment rate, which has grown over the past few months even though the number of actual jobs has increased. According to the Department of Labor, the national unemployment rate in November was 9.8 percent, up from 9.6 percent in each of the last three months.