WASHINGTON — Sales of new U.S. homes plunged unexpectedly in November to the lowest level since April, a sign the housing market recovery will be rocky and heavily dependent on the generosity of Uncle Sam.
The 11 percent slump from October's pace shows that consumers are taking their time following an extension of a deadline for first-time buyers to qualify for a tax credit. The incentive was set to expire at the end of November, but Congress pushed back the date to April 30 and expanded the program to include current homeowners who relocate.
"They don't have to act today," said David Crowe, chief economist at the National Association of Home Builders, who called the results "pretty awful."
New-home sales numbers, released Wednesday, are a better indicator of future real estate activity than sales of previously occupied homes, but capture a smaller slice of the market. The new-home figures tally sales agreements signed in November, while home resale numbers reflect contracts signed over the summer that were completed the same month. Monthly U.S. new-home sales data are not broken down by state and metro area.
While buyers of previously occupied homes were rushing to close deals by the end of November, buyers of new homes knew early in the month they could shop longer because of the extension.
The results show how reliant the housing market has been on government assistance. About 2 million home buyers have taken advantage of the tax credit of up to $8,000 for first-time buyers, the National Association of Realtors estimated this week. About 2.4 million more are expected to either tap that subsidy or another one for up to $6,500 for current homeowners.
Despite the poor showing from new-home buyers, the housing market has been recovering from the worst downturn in decades, largely due to a massive infusion of federal assistance. New-home sales are up 8 percent from the bottom in January but 74 percent below the peak in July 2005. Compared with November last year, sales were off 9 percent.
The Commerce Department said new-home sales hit a seasonally adjusted annual rate of 355,000 last month, off from a downwardly revised 400,000 pace in October. Economists surveyed by Thomson Reuters had expected 440,000.
Builders had 235,000 new homes for sale nationwide at the end of November, the lowest inventory level since April 1971. Though at the current weak sales pace, that still represents nearly eight months of supply. The median sales price of $217,400 was down nearly 2 percent from $221,600 a year earlier, but up about 4 percent from October's level of $209,400.
Since the housing bubble burst, new-home sales have represented a dwindling share of the overall market. New-home sales accounted for just 6 percent of total single-family home sales last month, down from a peak of more than 18 percent in summer 2005.
Buyers have been able to find better prices searching for previously occupied homes, especially among foreclosed properties, which made up about a third of sales last completed month.