New home sales surpass November expectationsDate posted: 11/25/15 12:00:00 AM
While summer is typically known as the season for home shopping, the housing market usually gets swept under the rug during the winter holiday season in order to make room for year-end shopping. But that wasn't necessarily the case in November, according to Bloomberg.
Despite a slew of stores staying open longer in the days after Thanksgiving, many retail figures reported less consumer spending than expected. The housing market was just the opposite in November.
Bloomberg surveyed 75 economists and revealed an anticipated annualized sales pace of 440,000 in November. Even though new home sales dropped 2.1 percent from October to November across the country, the annualized sales rate greatly outpaced expectations at 464,000.
"I think the country was developing a consensus that housing prices were not going to go down," Barry Rutenberg, chairman of Arthur Rutenberg Homes, told USA Today.
Rutenberg, also the National Association of Home Builders former chairman, said that his company has benefited from a surge in pent-up demand.
For Arthur Rutenberg Homes, a high-end custom home building franchisor, sales are up 55 percent in Florida and the Carolinas compared to last year as the company develops more houses in each market and continues to expand into new ones.
Gearing for more construction
As companies such as Rutenberg Homes gear for expansion, there is reason for optimism. Additional builders and developers will likely pick up their construction in order to meet demand. Both the improved employment sector and stock market are probable reasons that new home sales were better than projected, and USA Today reported that this likely shows consumers have adjusted to the recent spike in mortgage rates.
"There may have been a little sticker shock, but the fact that we're seeing steady (sales) increases shows it's not really derailing people's purchase plans," economist Sarah Watt House told USA Today.
The current housing market is on pace to sell 435,100 new homes through 2013, which would be the most units sold since 2008, according to Bloomberg. Applications for building permits held near a five-year high in October and are another reason for confidence in the sector. The demand for permits should lead to new home construction through the start of 2014.
"You did have a rise in mortgage rates, but house prices are still about 20 percent below the peak, affordability is high, and the labor market is improving," Gennadiy Goldberg, a TD Securities economist, told Bloomberg. "There's a natural demand for more housing."
New homes surpassing expectations, existing homes not so much
Existing home purchases fell 4.3 percent to a 4.9 million annual rate midway through December, according to the National Association of Realtors. The economists surveyed by Bloomberg predicted a median pace of 5.02 million. Still, those surveyed believe an estimated 5.1 million properties will be sold in 2013, making it the strongest year for the housing industry in seven years.
But why are the existing home sales numbers less than expected if most other numbers have surpassed projections?
One likely reason for the lowered results is the rise in the average 30-year mortgage rate. The rate fell as low as 3.31 percent in late 2012 and 3.35 percent as recently as May. The annual rate was 4.47 percent midway through December.
"Higher mortgage rates, higher home prices and lower consumer confidence due to uncertainty in Washington triggered a pause among homebuyers who are now being more cautious," said Jeffrey Mezger, CEO of KB Home, according to Bloomberg. "Affordability is at attractive levels, demographics remain strong and there's pent-up demand due to delayed household formation" that will support the market in 2014.
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