WASHINGTON — Americans stepped up their purchases of new homes at the fastest pace in more than 25 years in November, with sales skyrocketing 17.5 percent amid robust demand and a continued shortage of existing homes on the market.
New home sales last month jumped to a seasonally adjusted annual rate of 733,000 units compared to 624,000 in October, the Commerce Department said Friday. That's the biggest monthly gain since January 1992 and the most homes sold in a month since July 2007, just months before the economic downturn that ushered in the Great Recession.
The sharp upswing is a sign of the strong demand from would-be homebuyers amid the strengthening economy. Sales of new homes can be volatile on a monthly basis, but purchases have climbed 9.1 percent year-to-date and outstripped the increase in construction of single-family houses.
"In short, much stronger than expected. The data are highly volatile but sales appear to have strengthened further in recent months. The 638K average for the last four months (including weakening and reversal of hurricane effects) is up from 604K in the first seven months of the year. Upward momentum is being signaled by the homebuilder survey as well," High Frequency Economics Chief U.S. Economist Jim O'Sullivan said in a note.
The number of existing homes on the market has steadily fallen on an annual basis, while new construction has been unable to keep up with sales that are on their best annual pace since 2007. The current level of demand is propelled in part by unemployment hitting a 17-year low.
But it has also exposed an underlying problem with the housing market: there simply aren't enough homes being listed for sale.
The big November increase in new homes sales was somewhat tempered with revisions for previous months, particularly October, which was revised down from 685,000 homes sold to 624,000.
Sales in the West led the growth, increasing 31.1 percent. Sales in the South were up 14.9 percent, followed by the Northeast at 9.5 percent and the Midwest at 6.9 percent.
The median sales price of homes sold in November was $318,700, a 1.2 percent increase from a year ago.
"Stepping back from the noise, we are happy to argue that sales are trending higher, and easing lending standards, coupled with the tightening labor market, make us optimistic for the market in 2018," Pantheon Macroeconomics Chief Economist Ian Shepherdson said in a note.
A survey earlier this week showed that U.S. homebuilders are feeling more optimistic than they have in nearly two decades. The National Association of Home Builders/Wells Fargo builder sentiment index, released Monday, rose five points to 74 this month. That's the highest reading since July of 1999, more than 18 years ago.
"No wonder homebuilders are feeling so good these days," analyst Jennifer Lee, of BMO Capital Markets, said in a note to clients. "Tight supplies in the existing market continue to spill over into new builds."