Sales of New Homes Were Weaker Than Forecast in November

New homes sold at a slower pace than projected in November, a sign momentum in housing is cooling as the year draws to a close.

Sales rose 4.3% to a 490,000 annualized pace following a 470,000 rate in October, Commerce Department figures showed Wednesday in Washington. The median estimate of economists surveyed by Bloomberg called for a 505,000 pace, and purchases in the prior three months were revised lower.

After a strong start to the year, housing has posted choppy progress lately, held back in part by a limited selection of homes that's causing prices to appreciate faster than wages. Continued progress in the labor market that results in higher pay will be needed to boost demand further, giving builders renewed incentive to step up construction.

"Home prices have risen pretty sharply over the last three to four years because of the lack of supply," Stephen Stanley, chief economist at Amherst Pierpont Securities in New York, said before the report. "That seems to me to be the biggest negative for home sales outlook."

Economists' estimates ranged from a sales rate of 400,000 to 550,000 after a previously reported 495,000 in October. Purchases in August and September were also revised down.

The revisions suggest the November data should also be considered as preliminary. The report said there was 90% confidence the change in sales last month ranged from a 7.6% drop to a 16.2% increase.

New-home purchases were 11.1% higher in November than the same period in 2014 on an unadjusted basis, the Commerce Department's report showed.

The median price of a new home increased 0.8% last month from a year ago to $305,000.

Purchases rose in two of four regions in November, led by a 20.5% increase in the West, which was the most since August 2014. Sales climbed 4.5% in the South.

The supply of homes at the current sales rate decreased to 5.7 months from 5.8 months in October. There were 232,000 new houses on the market at the end of last month, up from 227,000.

Sales of new properties, which are counted when contracts are signed, are considered a more timely measure of the market than previously owned dwellings, which are counted when a purchase is finalized.

Purchases of existing homes slumped last month to the lowest level since April 2014 as a change in industry rules lengthened the time it took buyers to close on a deal, the National Association of Realtors said Tuesday. Closings on previously owned properties, which usually take place a month or two after a contract is signed, declined 10.5% to a 4.76 million annual rate after a revised 5.32 million pace in October.

Homebuilder confidence — a key indicator for the construction outlook — has softened in recent months, though it remains close to a decade-high, data from the National Association of Home Builders/Wells Fargo show. The group's index declined to 61 this month from 62 in November, and readings above 50 mean more respondents said conditions were good.

Builders, while remaining optimistic, were growing increasingly concerned about rising costs of land and labor, the group said in a statement.

Higher borrowing costs may be in store for next year. The Federal Reserve last week raised its benchmark interest rate for the first time since 2006, citing a solid expansion in domestic spending.

The quarter-point increase in borrowing costs was the culmination of a year-long effort by the Fed to prepare investors, consumers and companies for the end of an unprecedented era of ultra-easy money. Still, it will likely take some time for the increase of short-term rates to filter through to longer-term loans such as mortgages.