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US new home sales rise in October, while September figures revised down

H.S. Borji
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www.finances.com

The sale of new US homes rose in October following another downward revision in September, as the underlying trend continued to show the housing market was gaining momentum in the second half of the year.

New US home sales rose 0.7 percent to a seasonally adjusted annual rate of 458,000 in October, the Commerce Department reported today in Washington. A median estimate of economists called for a 1.1 percent increase.

The September rate was revised down to 455,000 from 467,000.

Compared to October 2013, new home sales were up 1.8 percent.

The median sale price of a new home in October was $305,000, while the average sales price was $401,100.

On a seasonally adjusted basis, there were 212,000 new homes for sale at the end of October. At the current sales rate, this represents a supply of 5.6 months.

On a regional level, sales were up in the Northeast and Midwest, the Commerce Department said. Sales declined in the South and West.

Separately, pending home sales declined unexpectedly in October, falling 1.1 percent, the National Association of Realtors reported today.

Last week the NAR said existing home sales rose more than forecast in October, rising above year-ago levels for the first time in 12 months. The sale of existing US homes rose 1.5 percent in October to a seasonally adjusted annual rate of 5.26 million, exceeding forecasts calling for no change.

Declining mortgage rates, improving inventory levels and stable price growth were primarily responsible for the October increase, according to the NAR.

Declining mortgage rates have sped up the housing recovery in recent months, as more buyers have rushed to lock in favourable rates following a period of rising commitment levels. The standard commitment on a 30-year fixed mortgage rate declined slightly in the week ending November 20, averaging 3.99 percent. The 30-year fixed rate had fallen to 3.92 percent a month earlier.

The 15-year fixed rate mortgage averaged 3.17 percent, down from 3.2 percent a week earlier, according to Freddie Mac’s weekly Primary Mortgage Market Survey.

The housing recovery began to cool in the summer of 2013, right around the time mortgage rates began rising. While rates remained low by historical standards throughout most of the year, they were considerably higher than in early 2013.

Perhaps the biggest barrier to the housing recover is stagnant wages. Average earnings have been rising around 2 percent annually, according to latest figures from the Commerce Department. That is well below the historical average. This comes even as the US economy has been pumping out jobs at an unprecedented rate. Employers added 214,000 nonfarm payrolls in October, pushing the monthly average to 222,000 over the previous 12 months.

Data on housing construction were mixed in October, although the underlying trend continued to support recovery. New residential construction declined 2.8 percent to a seasonally adjusted annual rate of 1.09 million, down from 1.038 million, the Commerce Department reported November 19. However, groundbreaking for single-family homes, which represent the largest segment of the market, increased 4.2 percent to 696,000. Meanwhile, building permits rose 4.8 percent to 1.08 million, a more than six-year high.

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