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New Home Sales Unexpectedly Fall 2.4 Percent to 1.082 Million Annual Rate

U.S. November New Home Sales Fall 2.4% to 1.082 Million Rate
Dec. 24 (Bloomberg) -- U.S. new-house sales in November unexpectedly fell to a 1.082 million annual rate, the slowest since May, following a record surge this year, a government report showed.

The November sales pace was down 2.4 percent from the 1.109 million of the month before, the Commerce Department said in Washington. Economists surveyed by Bloomberg News had estimated last month's housing sales at a 1.125 million pace, based on the median of 59 forecasts.

``It's hard to build on what already were brisk levels,'' said Avery Shenfeld, senior economist at CIBC World Markets in Toronto, before the report. He had projected November sales at a 1.18 million rate. ``The economy is not likely to get a lot of growth out of the housing sector next year given the levels it was at this year.''

Driven by mortgage rates close to the lowest ever, sales of new houses reached a record 1.2 million pace in June, a second- fastest 1.167 million in August and a third-best 1.145 million in July and September. November mortgage rates averaged less than a percentage point higher than the record-low 5.21 percent in mid- June, according to Freddie Mac, the No. 2 buyer of U.S mortgages. The economy has added 328,000 jobs since August.

New homes account for 15 percent of all house sales. Homebuilding contributes about 5 percent to gross domestic product and adds to growth by creating jobs and spurring spending on appliances, building materials and home furnishings.

The median price of new homes rose last month to $209,200 from $189,200 in October. Prices were up 15 percent in the past 12 months.

Inventory Rises

The inventory of new houses for sale climbed to a 4.1-month supply from 4 months, the report showed.

Sales rose 0.4 percent in the South to a 518,000 annual rate. They fell 10 percent in the Midwest to a 179,000 pace, 6.5 percent in the Northeast to 72,000 and 1.3 percent in the West to 313,000.

The number of new homes for sale rose 1.4 percent to 363,000 last month from 358,000 in October. The median number of months that new homes have been for sale rose to 4 months in November from 3.8 a month earlier.

The average 30-year fixed mortgage rate eased to 5.93 percent in November from 5.95 percent the month before, according to Freddie Mac.

The Mortgage Bankers Association's index of applications to purchase homes rose to an average 425.75 in November from 390.88 the month before. Last month's level is 7.5 percent below the record 460.5 reported for the end of May.

Homebuilder Optimism

Mortgage rates ``did come up from their extreme lows reached back in June, but there really hasn't been that much net change in long-term interest rates since July,'' said Douglas Porter, senior economist at BMO Nesbitt Burns in Toronto. ``So overall the interest rate environment remains attractive.''

Homebuilders remain optimistic about sales partly because the low interest rates have drawn more prospective buyers to their sales centers.

The National Association of Home Builders housing market index registered 70 for a second month in December, the highest in four years. The association's index of buyer traffic rose to 51 from 47 in November.

A continued rise in mortgage rates would reflect ``good job growth, good economic growth,'' said Donald Tomnitz, chief executive of D.R. Horton Inc., in an interview. ``As rates go up, our second-time homebuyers become bigger buyers because economic growth is going up. There are a whole host of second-time homebuyers out there who are hoping for more job security.''

D.R. Horton

Revenue at D.R. Horton, the second-biggest U.S. homebuilder by stock-market value, rose 32 percent in the fourth quarter ended Sept. 30 and increased in the double digits in October and November, Tomnitz said. The company is based in Arlington, Texas.

The economy may expand 4.4 percent next year, the fastest since 1999, according to the median estimate in a Bloomberg News survey of 62 economists taken Nov. 25 to Dec. 4.

Housing starts unexpectedly rose last month to the highest in almost 20 years, helped by low mortgage rates and backlogs of orders from earlier in the year. Homebuilders broke ground on 2.07 million houses at an annual rate last month, up 4.5 percent from a 1.98 million pace in October, the government said last week.

Last Updated: December 24, 2003 10:00 EST