NEW YORK (CNNMoney.com) -- New home sales unexpectedly plunged in November, according to a dismal government report.
The seasonally adjusted annual rate of new home sales plummeted 11.3% to 355,000 in November compared to the prior month, a Census Bureau report said Wednesday.
The November rate was the lowest since April, when new homes sold at an annualized rate of 345,000.
Sales of new construction were expected to edge up to an annualized rate of 438,000 for the month of November, according to a consensus of economists surveyed by Briefing.com. But that estimate was based on the initial report for October, which showed an annual sales rate of 430,000. On Wednesday, the Census Bureau revised the October rate down to 400,000.
The November decline can be attributed in large part to changes to the $8,000 home buyer's tax credit, according to Ian Shepherdson, chief U.S. economist for High Frequency Economics in Valhalla, N.Y. Buyers who were rushing to make a purchase ahead of the tax credit's Nov. 30 deadline were given a reprieve -- and more time to shop around -- when it was announced on Nov. 6 that the credit would be extended to April 30, 2010.
"The extension will in due course lift sales again but the key factor in November seems to have been the drying-up of the flow of buyers under the original program," Shepherdson wrote in an e-mail to CNNMoney.com.
Going forward, he expects sales "to rise sharply next year...because eligibility for the tax credit has been broadened to include most homebuyers, not just first-time buyers."
While the market for new home sales has improved in the wake of the housing crisis, it is a far cry from its July 2005 peak, when sales of new construction hit an annualized rate of nearly 1.4 million.
The largest November declines occurred in the Midwest and the South, where sales rates plunged more than 21% over the last 12 months.
The Census Bureau said there were 235,000 new homes for sale at the end of November. That represents enough supply to last for 7.9 months at the current sales rate.
The glut in inventory has declined substantially since January, when there was enough supply of new homes to last more than a year, according to the government.
"The supply of new homes for sale continues to fall," wrote Mike Larson, real estate analyst at Weiss Research in Jupiter, Fla., in a research report. "We now have fewer new homes on the market than at any time in more than 38 years. There's still plenty of competition from used homes, especially distressed property. But even that overhang is gradually coming down."
Home prices have fluctuated throughout the year, but have stayed within a relatively narrow range. In November, the median sales prices for a new home was $217,400, a modest decline from $221,600 in November, 2008.
On Tuesday, the National Association of Realtors released its report on existing home sales for November, which grew 7.4% month-to-month to an annualized rate of 6.54 million units.
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