New home sales image via Shutterstock.
Sales of new single-family homes skyrocketed in October, ending a three-month slump that began in July and providing evidence that elevated mortgage rates have not seriously hobbled the housing recovery.
New-home sales leaped 25.4 percent from September to October to a seasonally adjusted annual rate of 444,000, according to data released today by the U.S. Census Bureau and the Department of Housing and Urban Development (HUD). On an annual basis, sales of new single-family homes increased by 21.6 percent.
While the jump in mortgage rates that occurred last spring may have temporarily stymied home sales, any blow to the market was “entirely transitory,” according to research firm Capital Economics. October’s new home sales were about equal to those recorded between January and June of this year, despite the fact that average mortgage rates were 60 basis points higher in October.
“To our minds, this lends further support to our view that higher mortgage interest rates will not derail the housing recovery,” the firm said in a report.
At the same time, Trulia Chief Economist Jed Kolko cautioned not to assign too much value to the numbers in a tweet, saying that month-over-month changes in new home sales are “hugely volatile” and that home sales over the last three months are only 5 percent higher than they were during the same stretch a year ago.
The Census Bureau estimated that 183,000 new houses were for sale at the end of October. That represents a 4.9-month supply of homes at the current sales rate, down sharply from the 6.4-month supply measured for September.
While new-home sales increased substantially, existing-home sales in October fell for the second straight month, a decrease attributable to tight inventory, according to NAR.
Month over month, they dropped 3.2 percent to a seasonally adjusted annual rate of 5.12 million in October from 5.29 million in September, but increased by 6 percent on annual basis, NAR said.
During the same period the existing-home inventory shortage eased slightly, but today’s numbers indicate that a drop in new-home supply may have partly offset that increase.