Despite drop, new-home sales surpass expectations again in October

New single-family home sales came in at a seasonally adjusted annual rate of 999,000 in October, according to the newest figures from the U.S. Census Bureau and the Department of Housing and Urban Development.

That’s down a scant 0.3% from September’s revised rate, leaving new-home sales essentially flat as 2020’s unusually robust fall homebuying season continues. Even with the slight monthly decrease, new-home sales surpassed expectations in October, with consensus estimates anticipating a modest increase from the initially reported annual rate of 959,000 in September.

October’s pace is 41.5% higher than the pace seen in the same month last year; over the past three months, new-home sales have averaged a pace of just over a million units. Year to date, new-home sales are up 20.6% in 2020.

“Buyer traffic remained strong in October even as the country’s attention was focused on the elections and policy issues going into 2021,” said Chuck Fowke, chairman of the National Association of Home Builders. “Mortgage rates remain low and builder confidence is at an all-time high, indicating that demand remains steady and sales will remain solid.”

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A warmer-than-normal autumn seems to have benefited sales in the Northeast and Midwest, with sales in the two regions up 5.1% and 11.2% month over month, respectively. Meanwhile, the increasing share of homes built in the Southwest and South — the South, for example, accounts for 58% of all new-home sales by itself — means that sales as a whole should be less vulnerable to weather-related volatility, with weather in the two regions usually warm enough to sustain a homebuying season further into the cooler months.

Through October, new home sales are up in all four regions, by 18.5% in the South, 20.1% in the West, 29.8% in the Midwest and 29.9% in the Northeast.

The strong sales continue to place upward pressure on home prices, with the median price of a new home at $330,600 in October. That’s up from $322,400 in October 2019, an annual increase of 2.5%. Rising prices have been exacerbated by supply side shortages among builders, who continue to contend with higher costs for lumber and lots.

Ongoing new-home sales strength has also kept inventories of newly built homes anchored near record lows. Just 278,000 new homes were listed for sale at the end of October, unchanged from September and down 13.4% than October 2019. The available homes represent a supply of 3.3 months at the current sales rate, making October the fourth straight month with under fourth months’ supply of for-sale inventory.


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