By Bob Willis Dec. 23 (Bloomberg) -- Purchases of new homes in the U.S. unexpectedly fell last month, indicating a recovery from the worst housing slump since the Great Depression will be slow to develop. Purchases dropped 11 percent to an annual pace of 355,000 after a 400,000 rate in October that was lower than previously estimated, the Commerce Department said today in Washington. The median sales price decreased 1.9 percent from November 2008. The prospect that a government tax incentive would expire, combined with a 10 percent jobless rate and competition from foreclosed properties hurt builders such as Beazer Homes USA Inc. Last month’s decrease signals a sustained housing recovery may be difficult to secure without additional assistance from policy makers. “ There are still some potholes on the road to recovery,” Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd in New York, said before the report. “A lot of sales have been brought forward to take advantage of the stimulus dollars and low mortgage rates, and who knows how much more ammunition the government has in store.” Sales were projected to climb to a 438,000 annual pace from an originally reported 430,000 rate in October, according to the median estimate in a Bloomberg survey of 72 economists. Forecasts ranged from 400,000 to 460,000. Consumer spending increased in November less than anticipated as Americans cut back on services after buying more autos and electronics, others figures from the Commerce Department also showed. The 0.5 percent increase in purchases was the sixth gain in the past seven months and followed a 0.6 percent increase in October. Incomes Rise The report also showed incomes climbed 0.4 percent, the biggest increase since May, and inflation cooled. The median price of a new home in the U.S. decreased to $217,400, from $221,600 a year earlier. Sales of new homes were down 9 percent from November 2008. Construction cutbacks helped bring inventories down. The number of homes for sale fell to a seasonally adjusted 235,000, the fewest since April 1971. The supply of homes at the current sales rate increased to 7.9 months’ worth. New home purchases, while accounting for less than 10 percent of the housing market, are considered a timely indicator because they are based on contract signings. Sales of previously owned homes, which make up the remainder, are compiled from closings and reflect contracts signed weeks or months earlier. Existing Homes Sales of existing homes in November rose 7.4 percent to a 6.54 million annual rate, the highest level in almost three years, the National Association of Realtors said yesterday. Foreclosures accounted for 33 percent of all sales, while 51 percent were to first-time buyers, NAR said. Sales dropped in three of four regions last month, led by a 21 percent plunge in the South that took purchases in that area down to the lowest level since 1991. The Midwest showed the only increase, gaining 21 percent. President Barack Obama and Congress extended an $8,000 first-time buyer credit and expanded it to include current homeowners in a bid to boost demand. Still, the measure may have pulled sales forward and could result in fewer purchases in coming months. The Federal Reserve last week signaled it would keep lending rates low for “an extended period” to foster growth. The average rate on a 30-year fixed mortgage was 4.94 percent last week and has averaged 4.85 percent since the end of October, according to Freddie Mac. Fed Concerns “The housing sector has shown some signs of improvement over recent months,” Fed policy makers said in their statement. “Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit.” Record foreclosures are also restraining housing by driving down prices. Foreclosure filings in the U.S. will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc. said on Dec. 10. This year’s filings will surpass 3.2 million for all of 2008, the Irvine, California-based company said. Homebuiilders remain cautious. Beazer last month said orders rose 2.4 percent in the fourth quarter, and early debt repayment contributed to its first quarterly profit in three years. “We experienced some moderation in negative market trends,” Chief Executive Officer Ian McCarthy said in a statement. “Elevated unemployment and rising foreclosure activity make it difficult to predict when and to what extent the housing market will sustainably recover.” To contact the report on this story: Bob Willis in Washington at bwillis@bloomberg.net

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