New home sales fell slightly in November, dropping 2.1 percent after surging one month earlier to a five-year high.
Sales volume fell to a seasonally-adjusted annual rate of 464,000 during November, the Commerce Department said, down from a revised 474,000 total one month earlier. October's annual sales pace had represented a 17.6 percent jump and the highest pace of new home sales recorded since July 2008.
November's new home sales totals mean that most of those gains were retained in November, beating most economist expectations. The market consensus for November was pegged at a 445,000 unit pace.
“The slight drop of new home sales in November from the month prior is no cause for alarm as the market remains near a five-year high in sales. Homebuyers took a momentary pause when interest rates increased earlier this year and as rates fell thru October they are returning to take advantage of the market,” said Bill Banfield, a vice president at Quicken Loans.
"This figure is consistent with NAHB's member surveys, which show increasing confidence in the market," said Rick Judson, chairman of the National Association of Home Builders and a home builder from Charlotte, N.C. "Meanwhile, the very low supply of new homes on the market and tight credit conditions for home buyers show that builders are still cautious about getting ahead of themselves."
Optimism notwithstanding, the pace of new home sales remains well below the 700,000 annualized sales rate most economists say is indicative of a more healthy new home market.
Rising mortgage rates and concerns over new mortgage regulations have clouded the housing market's recovery recently, with debate raging in the industry over the potential effects of Qualified Mortgage regulations and other new rules set to affect the mortgage lending industry in early 2014.
30-year mortgage rates most currently are at 4.47%, up from 3.32% one year ago according to the most recent data provided by Freddie Mac.
Despite mortgage rates rising, the median price of a new home continued to rise, reaching to $270,900 in November. That's up 10.6 percent from one year earlier, the Commerce Department said.
Rising prices may reflect tightening inventory in the new home market, however, as just 167,000 new homes were on the market at the end of last month. The 6.7 percent drop in available inventory represents 4.3 months of supply; most economists consider 6.0 months of supply to be an indicator of a more balanced market.