Home Sales Dive in the South

Sales of new single-family homes fell in November to their lowest level in a year, largely because of a drop of more than 20 percent in the South, injecting a negative note into the housing market.

Mortgage rates have declined recently to their lowest level in six months and analysts expected that buyers would get off the sidelines and enter the market.

But data on Friday showed that overall sales of new homes dropped by more than 12 percent to 590,000 units, according to the U.S. Census Bureau and the Department of Housing and Urban Development. One encouraging sign from the data was that sales were more than 1.4 percent higher than last year.

Sales in the Northeast jumped by more than 3 percent, while the Midwest saw the biggest improvement at 25 percent. The West saw sales decline by a little more than 5 percent, the data showed.

Meanwhile, new homes were $20,000 more expensive, with the median sales price coming in at $434,700.

Analysts suggested that the declines may be an aberration and the trend could shift in the new year.

"New home sales fell to their lowest level in a year due to a plunge in sales in the South, which typically account for over half of total new home sales," Nancy Vanden Houten, lead U.S. economist at Oxford Economics, said in a note shared with Newsweek. "We expect new home sales to rebound in December, given the recent decline in mortgage rates and a scarce supply of existing homes for sale."

The 30-year fixed mortgage rate, which peaked at 8 percent in October, fell to its lowest point in six months at 6.67 percent, while the 15-year fixed mortgage rate crossed under 6 percent at 5.95 for the week ending December 21, data from Freddie Mac showed this week. Rates had been above 7 percent for 17 conescutive weeks, it said.

Sales of existing homes—a market that had been frozen as sellers refused to give up the low rates they secured in the past—ticked up in November, a sign that analysts said showed the housing sector was turning a corner.

On Friday, government data showed that the supply for homes available for sales was up. At the end of November, there were a little more than 450,000 new houses for sale, a supply of about 9 months' worth of sales if they continued at the current rate.

But analysts expected those homes to be snatched up by buyers as mortgage rates continue to trend downward. Builders have worked to incentivize buyers by buying down rates and paying commissions to agents, for example, which will help encourage more sales.

"We expect continued builder incentives along with lower mortgage rates will help clear some of the inventory in the months ahead," Vanden Houten said.