Strong New Home Sales a Moving Target Thanks to Revisions

November was another one of those months for new home sales when the topline numbers look terrific. And then you take a second look.

The U.S. Census Bureau and Department of Housing and Urban Development reported on Thursday that new home sales surged 12.4 percent from October to November. However, the seasonally adjusted annual rate of sales was at the lower end of analysts' expectations at 744,000 and was 14.0 percent below the November 2020 estimate.

The strong monthly gain arises from two straight months of significant downgrades to the prior period's estimate. September sales were reported at an annual rate of 800,000 only to be revised to 723,000. This month the 745,000 October estimate turned into 662,000 units.

Analysts polled by both Econoday and Trading Economics had a consensus forecast of 770,000 sales. The Econoday estimates ranged from 740,000 to 785,000 units.

On a non-adjusted basis there were 53,000 newly constructed homes sold during the month compared to 51,000 in October. With one month remaining, 2021 sales total 709,000 compared to 758,000, a 6.5 percent decline.

The median sale price of a new home in November was $416,900 and the average was $481,700. The respective sales prices in November 2020 were $350,800 and $396,100.

At the end of the reporting period there were 402,000 new homes available for sale. This was estimated to be a 6.5-month supply at the current pace of sales, up from 4.0 months in November of 2020 but down from 7.1 months in October of 2021. Of the homes in the inventory in November, only 39,000 were ready for occupancy and construction had not begun on more than one-quarter of the total.

Analyst Danushka Nanayakkara-Skillington writes in the National Association of Home Builders' (NAHB) Eye on Housing blog that, "Sales are increasingly coming from homes that have not started construction, with that count up 75.4 percent year-over-year (not seasonally adjusted). These measures point to continued gains for single-family construction ahead.

New home sales rose 15.6 percent in the Northeast compared to October and 8.8 percent year-over-year while they declined 25.4 percent and 44.8 percent in the Midwest. The South posted a 2.7 percent gain for the month, but sales lagged the prior November by 21.2 percent. Sales in the West surged 53.2 percent in one month and were 14.2 percent higher on an annual basis.