New home sales hit 12-year low

Annual rate of 647,000 marks worst level since April 1995 after a 9% drop in November.

Sales of new homes have plunged even more than expected to their lowest level in more than 12 years, leaving the market glutted with unsold homes and pointing to more trouble ahead for the battered housing market.

New home sales tumbled 9 percent in November to a seasonally adjusted annual rate of 647,000, according to a Census Bureau report Friday.

That was the worst showing since April 1995, when the pace of sales was 621,000, and is much worse than the 715,000 sales pace forecast by economists surveyed by Briefing.com.

The sales pace is down more than a third from year-ago levels. Furthermore, the decline is widespread nationwide, ranging from a 28 percent drop in the Northeast to a 38 percent plunge in the Midwest.

The weak sales pace still probably overstates demand for new homes since it counts a home as sold when a contract is signed, even though in many cases a contract is cancelled before a sale is closed. In fact, most major builders have reported sharp increases in cancelled orders in recent months because buyers have struggled to arrange financing or sell their existing homes.

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