Purchases of newly built single-family homes rose in November to the highest level in more than a decade as the housing market appears poised to end 2017 on a high note.
Sales increased 17.5% in November from the previous month to a seasonally adjusted annual rate of 733,000, the Commerce Department said Friday. It was the strongest pace since July 2007.
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"These are the exact kinds of new-home sales numbers the market has been desperate for the past few years," said Zillow Senior Economist Aaron Terrazas.
The housing market is showing strength across the board. Existing-home sales, which make up the vast majority of the market, jumped 5.6% in November from the previous month to reach the highest level since December 2006, the National Association of Realtors said Wednesday.
Part of the reason for the increase in new home sales was a downward revision in the previous month's sales pace.
What's more, new homes sales account for a relatively small share of total home purchases and data can be volatile month-to-month. November's increase comes with a margin of error of plus or minus 10.4 percentage points.
Still, new-home sales appear poised to end the year higher than last year. Through November new home sales were up 9.1% in 2017 from the same period a year earlier.
Hurricanes in Florida and Texas and wildfires in California may also have provided a boost to new-home sales. The strongest growth in sales was in the West, where sales jumped 31.1% compared with a month earlier, and the South, where they were up 14.9% from the previous month.
"I think a lot of these people are buying homes to replaces ones that they've lost," said Tendayi Kapfidze, chief economist at LendingTree, an online loan information site.
Builders increasingly are selling homes before they even start building them, an indication of strong demand and inventory shortages. About 35% of homes sold in November weren't yet started.
At the current sales pace, there was a 4.6 month supply of new homes on the market at the end of November, the slimmest inventory since July 2016.
"This is just another sign that the U.S. housing market has a supply problem and not a demand problem," said Ralph McLaughlin, chief economist at home-tracker Trulia.
The lack of inventory is helping push up prices. Friday's report showed the median sale price for a new home sold in November was $318,700, up from the $315,000 median price in November 2016.
Economists expect both new and existing home sales to continue improving but caution there could be a pullback in the early months of next year because of tax legislation signed into law Friday morning.
Rob Dietz, chief economist at the National Association of Home Builders, said he expects a slowdown in sales growth next year stemming from changes to the tax code that offer fewer incentives for homeownership. Mr. Dietz expects new home sales to rise 5% in 2018 to more than 650,000 -- less than had the tax overhaul not happened.
"The longer-run trends will remain in place but there are going to be transition effects due to tax reform," Mr. Dietz said.
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(END) Dow Jones Newswires
December 22, 2017 15:49 ET (20:49 GMT)