(MCT)—New home sales shot up in October, evidence that buyers nationwide may be absorbing higher mortgage interest rates.
Sales of newly built single-family houses rose 25.4% from September to a seasonally adjusted annual rate of 444,000, the Commerce Department said Wednesday. The sharp rise comes after new home sales fell 6.6% in September.
Compared with October 2012, sales are up 21.6%.New homes in October sold for a median price of $245,800 nationally. Sales rose in all regions. The West saw the smallest rise as buyers purchased 15.2% more new houses than a month earlier.
The pause and decline in the third quarter appears to be a reaction to rising interest rates and the rising uncertainty around government debt and deficit resolution that led to the shutdown in early October. As rates fell back and the shutdown ended, consumers returned to the market. Even with the large variances, the 25.4% change is enough to be considered an increase at the 90% confidence level.
The inventory of new homes for sale dropped back to 183,000 as builders’ inventories suffered from relatively slow building trends in the last several months. Because of the uptick in the sales rate, the months’ supply dipped to 4.9 months, the lowest since the second quarter. Economists generally consider a supply of six months to be healthy.
The inventory of completed homes is particularly low at 42,000, up slightly from the third quarter and back to levels last seen in the first and second quarter. The completed inventory is important to many potential home buyers who waited to be certain that their existing home sold and hence need a home ready for occupancy.
Home prices dipped 0.6% from a year ago (the data is not seasonally adjusted) and that appears to be a result of a rise in sales in the$150,000 to $199,999 range and a fall in sales $300,000 to $399,000 range. Sales were up the most in the Midwest and South, also contributing to the explanation that the virtually no change in prices is driven by composition of sales rather than base home prices.
NAHB expects this sales level to sustain itself through the end of the year as pent up demand continues to feed the market, as interest rates remain low by historic standards and as the supply of existing homes for sale remains low.
Sources: MCT and NAHB Eye on Housing blog
©2013 the Los Angeles Times
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