New Home Sales Again Hit 10-year High

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Pace of contracts for new home sales INCREASED 6.2 percent in October to 685,000 (seasonally Adjusted Annual Rate), the highest level in 10 years (October 2007: 727,000)
  • Sales pace for September was revised down 22,000 to 645,000, with the largest revision, down 27,000 in the hurricane-afflicted South;
  • With faster September sales rate, months’ supply of new homes for sale FELL back to 4.9 percent, the lowest since July 2016;
  • Unsold inventory ROSE 4,000 to August at 282,000
  • Median price of a new home FELL $12,100 from September to $312,800;
  • Year-year the median price of a new home was up $10,000 (3.3 percent)

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Providing rationale for the boost in builder confidence, the pace new home sales rose in October to 685,000, the fastest pace in 10 years the Census Bureau and Department of Housing and Urban Development reported. It was the second straight month the sales pace reached a ten-year high.

The October sales increase included came on the heels of a 14.6 percent increase in September.

The sale rate has jumped over 20 percent in the last two months from an annualized rate of 565,000 in August,

The median price of a new home dropped 3.7 percent ($12,100) in October, nearly wiping out the $13,200 increase recorded in September.

The government report tracks contracts for sale of newly built homes. The sales report from the National Association of Realtors, which reflects resales of homes, showed a modest (2.0 percent) gain in October. The NAR report on contracts for sale (pending home sales) is scheduled for release later this week.

The average rate for a 30-year fixed rate mortgage, according to the weekly Freddie Mac survey, increased from 3.81 percent in September to 3.90 percent in October.

The strong October sales pace will exacerbate home building pressures even as inventories increase. Potential buyers could be looking to lock in mortgage rates before the Federal Open Market Committee meets in two weeks. The FOMC is expected to increase the benchmark federal funds rate by 25 basis points from the current range of ¾ to 1 percent.

Even with the increase in inventories, the government reported earlier this month starts of single-family homes increased 1.9 percent to a seasonally adjusted annual rate of 839,000, the fastest pace since February. Indeed, the “gap” between new home sales and completions fell in October to 108,000 with the rate of completions exceeding sales by 108,000 (SAAR) the narrowest since March 2015.

Builders, according to the Census report on housing starts, increased the pace of multi-family starts in October by 13.9 percent, the sharpest increase in 13 months.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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