Sales of new homes plunged unexpectedly last month to the lowest level since April, a sign the housing market recovery will be rocky.
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 data, 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 in November.
So while home resales rose 7 percent last month, the National Association of Realtors reported Tuesday, most economists expect completed sales to decline during the winter months.
"Buyer traffic is likely to be flat until spring," predicted Mark Vitner, senior economist with Wells Fargo Securities.
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 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.
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.
The only strong region was the Midwest, where sales rose 21 percent. Sales fell by 21 percent in the South, 9 percent in the West and 3 percent in the Northeast.
Builders had 235,000 new homes for sale nationwide at the end of November. That was down 2 percent from October and the lowest inventory level since April 1971. At the current weak sales pace, that still represents nearly eight months of supply.
Robert Toll, CEO of luxury builder Toll Brothers Inc. said earlier this month demand has been "choppy" after several strong months in the spring and summer.
"You just have to bite the finger, be patient, and wait until you see what comes out in the latter part of January, all of February and in the early part of March," he said.