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New home sales rose in November, as expected, coming in at an annualized rate of 377,000 dwellings. That was up from the downwardly revised October reading of 361,000 homes. Expectations had been for a nominally lesser result of 375,000 homes. This was just the latest in a series of upbeat housing metrics, which in the most recent month takes in building permits, sales of existing homes, and housing prices. This sector is on the way back and pressing forward with increasing vigor, at this time.

All told, this was the best monthly result in more than two years, with new single-family home sales gaining 4.4% in the latest month. We have to go back to April of 2010, when homebuyers were getting tax credit incentives to purchase a new dwelling to get a better figure. But that was an artificial number, as the credits were then expiring and further sizable declines would soon follow.

Meanwhile, the number of new homes listed for sale, adjusted for seasonal factors, at the end of November was 149,000 on an annualized basis. That was a supply of just 4.7 months at the recent sales pace. That is less than a six-month supply, which is considered healthy. At the trough of the down cycle, supplies were pushing up to a year in total. Such depleted inventories suggest that demand for new homes, as well as the prices of such residences, will continue to climb in the months to come. In all, the average price of a new residence last month was $246,200. That was up 3.7% from just a month earlier. In addition, in the Case- Shiller 20-city home price index issued yesterday, it was noted that new home prices have climbed almost seven percent so far this year.

It should be noted that these encouraging volume, price, and inventory figures, notwithstanding, the housing market remains well below the peak levels of the 2000-2005 half decade, when at the top of the cycle, new home sales had been taking place at a better than 1.3 million annualized rate for a brief spell. By comparison, in 2011, such sales totaled just over 300,000 homes. So, we have a very long way to go before we are even half way back.

Our sense is that we have much further to go to on the upside in the next few years, with most signs suggesting that 2013 will be notably better than 2012. As for regions, the picture was mixed, with gains in the South and the Northeast, but declines in the West and the Midwest. Overall, though, this was another strong report from a fast-improving sector.