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Housing Sales Slide, Construction Flat

Showing continued signs of deflation and strain, rather than outright bursting, the housing bubble contracted once again during November, with sales continuing to subside even as builders broke new ground for even more homes.

Sales of existing homes, by far the largest segment of the national housing market — generating more than two-thirds of all housing activity — slipped by 1.7 percent during November, the National Association of Realtors reported. Moving down in lockstep, highly volatile sales of new homes skidded down even further, by 11.3 percent, the U.S. Commerce Department reported.

In the only uptick during November, housing starts, climbed unexpectedly higher, rising by 5.3 percent and recovering most of the ground lost in a deep 6.6 percent slide the month before, according to the Commerce Department. But in signs that builder activity may soon start slowing down, building permits for future construction of single-family homes were virtually flat, edging up a mingy 0.2 percent.

And builders may be growing more cautious. “Many builders sense some tapering off of buyer demand because of resistance to high prices and rising interest rates,” said Dave Wilson, president of the National Association of Home Builders. As a result, he added, “many companies have begun offering certain incentives in order to maintain their sales and production,” putting a potential squeeze on margins and profits.

Taking note of slumping sales of existing home sales, David Lereah, chief economist of the National Association of Realtors, said that higher mortgage interest rates were responsible for moderating sales. Nevertheless, Lereah asserted, “The current pace of home sales activity remains historically strong.” A “modest downtrend,” he argued, “will be good for the long-term health of the housing sector.”

Housing By Region
Month-To-Month % Change, Nov. 2005

EXISTING HOME SALES HOUSING STARTS NEW HOME SALES
Source: U.S. Department of Commerce and National Association of Realtors
Northeast -2.7% 11.0 13.4%
Midwest -1.3 12.3 -18.3
South -0.7 -1.3 -5.5
West -3.7 11.5 -22.1


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