Economy

New Home Sales Rebound From September Low

December 5, 2013

New residential sales in October soared 25.4 percent above the revised September rate of 354,000 to a seasonally adjusted annual rate of 444,000. In comparison, the October 2012 annual estimate was 365,000, a 21.6 percent increase year-over-year. The surge beat economist expectations ranging from 425,000 to 429,000 sales for the period.

The median sales price for new homes in October was $245,800 and the average sale price was $321,700. It was the fourth month in a row that the median price fell and a possible indication that builders are dropping prices. On a seasonally adjusted basis it is estimated that 183,000 new homes were for sale at the end of October—a 4.9 month supply at the current sales rate.

Sales were up in all four regions of the US, with the Midwest leading with a rebound of 34 percent.

September and October data were delayed due to the government shutdown and released together on Dec. 4. Sales in July through September dropped below a seasonally adjusted rate of 400,000 leading some economists to suggest increasing mortgage rates affected the market more than previously estimated.

The strong gain in the stock market has been offered as a reason for the rebound in home purchases as buyers become more confident of economic recovery. Low inventory of existing homes and easier financing by builders to encourage buyers are also key reasons said Keith Gumbinger, VP of mortgage information at HSH Associates in an article by CNN Money.

Housing recovery depends on wage growth, household formation and inventory says T. Rowe Price Associates chief economist Alan Levenson. The number of households generally grows by 1.5 percent per year as young people graduate from college or move out of their parent’s homes. The rate dropped by 2/3 during the recession said Levenson. Wages have been slow to grow this year but low inventory and improved demand should stimulate new construction.