Sales of new homes fell to their lowest level in more than 12 years in November, as the nation's housing crisis continued unabated. Purchase volume fell 9 percent on a revised monthly basis in November to 647,000, the Commerce Department said in a report released Friday; that number is 34.4 percent below year-ago levels. October's new home sales numbers were adjusted downward from a 728,000 rate to 711,000; it's likely that November's sales numbers will also see a similar revision. It's worth noting here that last month's report seemed to suggest a 'phantom gain' in new home sales during October due to the effect of prior period adjustments; with the current downward revision to October's new sales numbers, that 'phantom gain' is now strongly erased. Bloomberg reports that even the initial, unadjusted November outcome for new homes sales was worse than expected:
A Bloomberg survey of 68 economists forecast sales would fall to an annual pace of 717,000 from a previously reported 728,000 rate in October, according to the median estimate. Economists' forecasts ranged from a low of 685,000 to a high of 750,000.
The drop in sales volume was accompanied by an apparent drop in inventory, with builders reporting 505,000 new homes for sale at the end of November, compared to 516,000 units in October -- a number that many economists have argued is likely understated significantly due to a record volume of cancellations. Nonetheless, a declining inventory number wasn't enough to offset an even sharper decline in demand, with months of supply in November increasing to 9.3 months as a result. Months of supply stood at 8.5 months in October. Prices also declined 0.4 percent on a median basis year-over-year, according to the report, although heavy revisions and a lack of insight into builder incentives make the pricing numbers here unreliable at best. Calculated Risk provides strong analysis of the new homes data, and notes that this is the fourth report to emerge since the start of widespread credit turmoil. From a mortgage industry perspective, this is strong proof that origination volumes are likely to fall off of a cliff heading into 2008; further, as builders sit holding new-home inventory, pricing pressure on existing homes will continue to increase.