Sales of new homes rose 7.7 percent in November, the first increase since July and the biggest jump in over a year, the Census Bureau reported yesterday.
New single-family homes were sold at a seasonally adjusted annual rate of 671,000, up from the October annual rate of 623,000 and 13 percent above the November 1984 rate of 596,000. The November advance was the biggest monthly increase since a 20.3 percent rise in August 1984.
The pace of new-home sales buoyed hopes in the housing industry that a continued decline in mortgage interest rates will fuel a housing sales spurt in the new year.
Industry officials said they had been puzzled by signs that appeared to point in the opposite direction, including declining new-home sales during September and October and news this week that sales of existing homes had dropped by 3.4 percent in November, the biggest drop since February.
"At the end of the third year of recovery, the outlook for the nation's housing industry remains positive," said John J. Koelemij, president of the National Association of Home Builders. "The pace of new-homes sales in November suggests there is more mileage in the housing marketplace and that we may even see some quickening in the months ahead in reaction to highly favorable mortgage interest rates."
Lyle Gramley, chief economist for the Mortgage Bankers Association of America, said the November figures were triggered by the 1.5 percent drop in mortgage interest rates over the past two months. Interest rates for conventional mortgages now average about 11 percent, compared with 15 percent at the middle of last year.
"There's been a considerable decline in interest rates since the middle of October, and that has arrested the decline in new-home sales that we saw in the previous months," Gramley said. "We ought to expect some improvement in the next quarter because of the continued decline in interest rates."
Industry analysts said that the 7.8 percent decline in new-home sales in October may have been a reaction to tighter credit standards introduced by lenders that month. The drop in interest rates in November allowed some of the marginal buyers back into the housing market, they said.
Kent W. Colton, executive vice president of the NAHB, said that builder concessions could account for the better record in new-home sales this month and that the continued recovery of the housing market in the northeastern states fueled much of the increase.
"Builders are offering their houses at relatively good deals, either through lowering the purchase price or by providing better financing," Colton said. "There's a spirit that, with interest rates low, this is a good time to sell."
New-home sales surged by 48.2 percent in the Northeast and more moderately by 4.4 percent in the South, but sales fell 0.6 percent in the West and 2.6 percent in the Midwest.
"The housing market in the Northeast remained depressed in 1983 and 1984, even though it was recovering in many other areas," Colton said. "The increase in new-homes sales in the Northeast shows that there is still pent-up demand that has not yet been met, as it has in other areas."
The Census Bureau said that an estimated 46,000 new houses were sold during November at an average sales price of $102,500, up just $100 from the average sales price in October. The average sales price has risen 1.08 percent since November 1984.
At the end of November, there were 360,000 new houses for sale, a supply of 6.6 months, slightly lower than October's supply of 6.8 month.