November New Home Sales Fall

New home sales dropped unexpectedly in November as consumers hurried to take advantage of the first-time home buyer tax credit before the original expiration date came.

The commerce Department data released Wednesday showed that the sales of new homes fell 11.3 percent, driving down stocks that had started the day with modestly high gains. The sales were at the lowest levels since March.

The shock to the markets was a result of economist expecting an increase before the steep drop was reported. Also the data came only a day after the Commerce Department reported that the sales of existing homes had risen surprisingly by 7.4 percent.

Buyers rushed to take advantage of the $8,000 first-time home buyer tax credit before it was originally expected to expire on November 30. The government backed stimulus has since been extended to April 30.

Economists expect that home sales will stay flat until the rush pick back up in the spring.

The adjusted annual rate for November was 355,000, which is the lowest level since April. The November drop all but wiped out the headway that the new home market had made since the January bottom.

Unlike the sale of an existing home, the sale of a new home is recorded when the buyer signs a sales contract and not at the closing. To qualify for the tax credit a buyer had to close the purchase of a home by November 30 until the deadline was extended.

The new home sales data followed a report that personal income and consumer spending improved in November.

The consumer sentiment survey for December also showed growth on Wednesday at 72.5 from 67.4 in November, but lower than the previously reported 73.4.