New home sales rose to a 733,000 annualized rate in November for a 17.5 percent monthly spike that is the largest in 25 years. Revisions are only limited offsets, down a net 71,000 in October and September to still 600,000 plus rates of 624,000 in October and 635,000 in September. Acceleration over the last three reports is the strongest since 2003.
But home builders do seem to be giving discounts as the median price fell 0.3 percent in the month to $318,700. Year-on-year, the median is up only 1.2 percent against a 26.6 percent sales surge. On supply, builders are managing to keep pace with the number of new homes on the market unchanged at 283,000 and also unchanged relative to sales, at 4.6 months.
The West and South, the two key regions for new homes, are showing special strength. Sales in the West rose 31.1 percent in the month to a 194,000 rate and a 22.8 percent year-on-year gain, while sales in the South rose a monthly 14.9 percent to 416,000 for a yearly 32.5 percent gain. Sales in the Northeast, both for new homes and existing homes, have been showing unusual acceleration, rising 9.5 percent in the month but to a 46,000 rate that in size is far below other regions.
New home sales are always volatile due to low sample sizes but the report right now is easily the hottest of any economic indicator, in what is certainly a reflection of the strong labor and stock markets as well as favorable pricing. Together with the gains for permits and existing home sales earlier in the week, housing clearly looks to be a leading force for the fourth-quarter economy.
New home sales have surged the last two reports with monthly gains of 6.2 and 14.2 percent to an expansion high 685,000 annualized rate. Supply has been coming into the market and prices have been coming down which are both positives for sales. The consensus for November new home sales is for a tangible come back to a 650,000 annualized rate.