Sales of new homes rebounded last month, a sign the housing market may be stabilizing.
New-home sales rose 3.4% in November, the Commerce Department reported, much stronger than analysts were expecting. Also, inventories of unsold homes fell and the median sale price rose. But sales were still down 15.3% from a year ago.
"Yes, housing is going to continue to be a little bit of a drag on the economy, but I think the worst is behind us, not ahead of us," said Maria Fiorini Ramirez, MFR President & CEO, appearing on CNBC's "Morning Call."
With signs that buyers are coming back into the market, levels of new-home construction will pick up again either in the second or third quarter of next year, said Peter Morici, a professor at the University of Maryland, also on "Morning Call."
Fundamentals Are Good
"I don't know that we've seen a bottom, however if housing prices decline any further in the first quarter, that will be temporary," Morici said.. "I think fundamentals, especially in the big cities like New York, San Francisco, Washington, Boston and so forth, are going to do very well."
Economists were encouraged that the latest figures showed a month-to-month increase in the pace of home sales. Over the past six months, sales have risen only three times.
The median sales price of a new home rose 3.2% to $251,700 from $243,800 in October, while the supply of homes available for sale at the current sales pace fell in November to 6.3 months' worth from 6.7 months' worth in October. There was a total of 545,000 homes available for sale at the end of November, down slightly from the 553,000 reported in October.
The decline in housing inventory levels showed builders are managing the pace of construction, said MFR's Fiorini Ramirez said.
According to the report, new home sales rose 22.5% in the Northeast. They were up 22.4% in the Midwest, and they gained 19% in the West. Sales fell 9.3% in the South, the biggest region covered in the report.
Mortgage Applications Plunge
Meanwhile, mortgage applications plummeted last week to the lowest in nearly five months, as home refinancing loan demand plunged amid climbing interest rates, an industry trade group said.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, for the week ended December 22 decreased 14.2% to 555.8, its lowest level since early August. The index stood at 647.6 in the previous week.
Michelle Meyer, economist at Lehman Brothers in New York, said the indexes are volatile on a weekly basis but the monthly averages show a stabilization in the volume of applications.
"If you look at a monthly average, the purchase and the refinancing index have been stabilizing over the past few months," she said. "December started off very strong, so on the month it was still fairly positive the MBA applications."
Meyer said the data is consistent with the company's outlook for a leveling off in sales of homes.