New home sales for single-family units in the U.S. fell for a second straight month in November, the latest sign of a struggling housing market. The Commerce Department released a report Tuesday that showed sales declined 1.6 percent to a seasonally adjusted annual rate of 438,000 units, while October’s sales pace was revised down to 445,000 units from 458,000 units.
Economists polled by Reuters had forecast new home sales rising to a 460,000-unit pace last month.
New home sales, which account for roughly 8 percent of the entire housing market, are typically volatile on a month-to-month basis. However, taken together with housing market data in its entirety, the sector is undoubtedly struggling. Juxtaposed to November of last year, sales were down 1.6 percent.
A report on Monday showed home resales tumbled to a six-month low in November.
The housing market is being hobbled by a slow pace of household formation, a result of sluggish wage growth.
The housing market has struggled in the second half of 2013 in the wake of a small increase in mortgage rates, which have since pulled back from their peaks. Even with increased government involvement, which once again is artificially injecting risk into the market, it is barely propping up sales.
The National Mortgage Risk Index (NMRI) for Agency purchase loans rose in November to 11.69 percent, up from the average of 11.29 percent for the prior three months (revised). The risk indices for Fannie Mae, Freddie Mac, the FHA, and the VA all hit series highs in November.
“The increase in risk for all the major government agencies over the past two years is cause for concern,” said Stephen Oliner, co-director of AEI’s International Center on Housing Risk. “This is especially true for FHA loans, which would experience a tidal wave of defaults if we have another severe financial crisis.”
Last month, new home sales fell in the Northeast, the Midwest and the South, but rose 14.8 percent in the West. The stock of new houses available on the market rose 1.4 percent last month to 213,000, or the highest since May 2010.
The regional sales should be digested with the FHA’s NMRI, which stood at 24.26 percent in November, up 0.3 percentage point from the average for the prior three months (revised). The November level is 1.7 percentage points higher than a year earlier and 3.4 percentage points higher than two years ago. The high level risks fueling home price volatility, particularly in lower income and minority areas.
According to the ICHR research, the softness in mortgage lending is not due to tight standards. but rather due to reduced affordability, loan put back risk, and slow income growth for many households.
Meanwhile, progressing at November’s sales pace would take 5.8 months to clear the supply of houses on the market, up from 5.7 months in October. The median new home price rose 1.4 percent from a year ago to $280,900.