New home sales near all-time low
New home sales in 2011 could be the worst ever, despite a rise in November. Last month saw a 1.6 percent increase in new home sales, far less than what economist had hoped for.
Americans bought slightly more new homes in November, but 2011 will likely end up as the worst year for sales in history.
The Commerce Department says new-home sales rose 1.6 percent last month to a seasonally adjusted annual rate of 315,000. That’s less than half the 700,000 new homes that economists say should be sold to sustain a healthy housing market.
It’s also below the 323,000 homes sold last year — the worst year for sales on records dating back to 1963. December would have to produce its best monthly sales total in four years for 2011 to finish ahead of last year’s total.
New homes account for less than 10 percent of the housing market. But they have a big impact on the economy. Each new home built creates roughly three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
Economists note that housing is a long way from fully recovering and that many people are opting to rent because they can’t afford to buy or don’t feel a home is a wise investment right now.
Home construction has begun a gradual comeback and should add to economic growth in 2011. But the main reason for that increase is that the rate of apartment construction is nearly twice as fast as it was two years ago. Single-family-home construction remains depressed.
“New-home sales only capture one-family homes sold, and the recent pick-up in multifamily construction does not feed into these numbers,” said Yelena Shulyatyeva, an analyst at BNP Paribas.
Builders have stopped working on many projects because it’s been hard for them to get financing or to compete with cheaper re-sale homes. In November, builders slashed prices to their lowest levels in more than a year. The median sales price of a new home dropped nearly 4 percent last month to $214,100.