The Commerce Department reported a 9% drop in new home sales in November. The 13% margin of error puts the actual change anywhere from a 22% drop to a 4% increase and the revisions the last several months have seen gains change to drops and drops in sales change to gains pretty regularly.
New home sales had shown some strength in September and October with home builders offering incentives and cutting prices. The median price rose in November, indicating that builders may be backing off their efforts to cut inventory and accounting for some of the drop in sales. Unusually mild October weather throughout most of the country had buyers out in heavier numbers compared to October as well.
The real bad news is not the drop in new home sales, which is only about 15% of the housing market, but that the dropping sales pushed inventory back up above a 9-month’s supply, erasing any gains from decreased construction starts. If that glut pushes new home prices low enough to compete with similar existing homes, it spells more trouble for homeowners in “must sell” situations.
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