November new home sales tank

We just got data on new home sales for November. So what did today's report show?

* Sales plunged 9% to a seasonally adjusted annual rate of 647,000 from a revised 711,000 SAAR in October (previously reported as 728,000). On a year-over-year basis, sales were down 34.4% from 987,000 in November 2006. Sales haven't been this weak since April 1995 (621,000), as shown in the chart above.

* For-sale inventory came in at 505,000 new homes. That was down 1.8% from 514,000 in October (previously reported as 516,000) and down 6.8% from 542,000 in November 2006. The peak was 573,000 units in July 2006. On a months supply at current sales pace basis, inventory was 9.3 months, up from 8.8 in October (previously reported as 8.5), and up from 6.5 a year earlier.

* The median price of a new home rose 4.2% to $239,100 in November from $229,500 in October (previously reported as $217,800). Prices were down 0.4% from $240,100 in November 2006.

I've been a housing "bear" for some time. But even I'm stunned by how awful new home sales were in November. Sales are now running at the lowest level since 1995. Moreover, inventories remain elevated. The key "months supply at current sales pace" measure came in just shy of the cycle high -- 9.4 months in August. And the number of completed new homes sitting on the market hit a fresh all-time high of 193,000.

Prices were largely stable. But the collapse in the sales rate suggests that won't last. Builders simply have to get more aggressive on pricing to clear their supply backlog and encourage buyers to step up to the plate. That's especially true now that mortgage financing has become harder to get and the job market is showing signs of weakening.