New home sales tumble in November
see "New-Home Sales Dropped Last Month" (NY Times, 12/24/05) http://www.nytimes.com/2005/12/24/business/24econ.html Last week, new home sales (in terms of quantity of houses) fell a dramatic 11%, the largest drop in 12 years, with inventories now nearly at 5 months, the highest level since 1996. The NY Times writer really missed the point when he said that the median new home price "was little changed from a year ago at $225,200." More relevant is that the median price was over 4% lower than the prior month, bringing new house price gains for the year down to about 1/4%, or well under the rate of inflation or short-term interest rates. Although new home sales only amount to about 1/6th of home purchases, prices of real estate like anything else are determined at the margin. Thus, a substantial weakening of the new home market could easily drag down the rest of the market. The National Association of Realtors will report November existing home sales this Thursday, with a slight decline of about 1% from October's level expected.
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