WASHINGTON (MarketWatch) — Americans looking to buy newly built homes evidently brushed off concerns about the government shutdown in October, pushing up sales to their highest level in four months.
New homes sold at an annual rate of 444,000 in October, up 25.4% from 354,000 in September, the government said Wednesday. Economists polled by MarketWatch forecast sales to total a seasonally adjusted 419,000 in October.
The sharp improvement in home sales follows earlier reports on Wednesday showing a stronger-than-expected increase in private-sector hiring in November and rising exports in October, perhaps evidence that the U.S. economy is growing faster.
The positive reports have spurred renewed speculation that the Federal Reserve might scale back its bond-buying stimulus strategy as early as this month.
Demand for new homes in October was strong across the country, with double-digit percent gains in all four major regions. Sales climbed 34% in the Midwest, 28% in the South, 19% in the Northeast and 15% in the West.
The spike in sales suggests the housing market has bounced back after a drop in demand during the summer, when mortgage rates surged to their highest level in two years.
“The housing market recovery is continuing despite higher mortgage rates,” said Stuart Hoffman, chief economist at PNC Financial Services. “There is a great deal of pent-up demand given that sales have been far below trend for the past six years.”
Part of what drove sales was more demand for lower-priced homes, a trend that typically emerges in the colder months. The median price of new homes fell 4.5% from September to $245,800 in October. That’s the lowest level since November 2012 and 0.6% below the same month of 2012.
Mortgages rates have also eased a bit after shooting to as high as 4.5% in August from less than 3.4% at the end of 2012. That also appears to have drawn more buyers back into the market.
The burst of new home sales in October slashed the availability of properties on the market. The supply of new homes sank to 4.9 months at the current sales pace from 6.4 months in September. That’s the lowest amount since June.
One potential worry, however, is a drop in mortgage applications. They fell in the last week of November for the fifth straight week, the Mortgage Bankers Association said Wednesday. Most of the decline was in refinancing instead of new sales, however.
So far home builders aren’t showing much concern. They continue to file for new permits and are expected to boost the number of new homes for sale in 2014. The SPDR S&P Homebuilders ETF rose 0.3% Wednesday, and it’s up 18% this year.
The collection of home sales data for both October and September was delayed by the federal shutdown, prompting the government to release the information on the same day. Sales figures for November will be released right before Christmas.
Jeffry Bartash is a reporter for MarketWatch in Washington.
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