Newly built home sales rose in October from the previous month, driven by higher-priced home sales, providing little comfort to a housing market that has been hurt by the rapid doubling of mortgage rates.
The Commerce Department said Wednesday that new home sales rose 7.5% in October compared to September to a seasonally adjusted annual rate of 632,000. This represents a reversal from the previous month when new home sales fell about 11% in September from August.
However, new home sales numbers can be volatile and are often revised, and sales in October were down 5.8% from a year earlier. This marks the eighth consecutive month of declining sales year-on-year. The sales data does not include cancellations, which have spiked in recent months. Builders also slowed construction activity.
The housing market has slumped this year due to the rapid rise in mortgage interest rates. Many prospective homebuyers have been unable to qualify for loans or have had to slash their purchase budgets after higher interest rates sent their projected monthly costs up by hundreds of dollars. Existing home sales fell for nine consecutive months through October.
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Economists polled by The Wall Street Journal had forecast a 5.5% monthly decline in new home sales. However, housing analysts cautioned against overeating the October number.
“New home sales beat expectations, but a reversal of the overall downward trend is questionable at this time given high mortgage rates and construction pessimism,” said Robert Fricke, corporate economist at Navy Federal Credit Union.
Homes priced at $500,000 and over made up 48% of new homes sold in October, up from 41% in September. Homes priced between $300,000 and $499,999 fell to 39% of sales in October, from 51% in the previous month.
More expensive homes are often repeat buyers, many of whom have likely profited from selling a previous home for a profit.
A measure of homebuilder confidence fell for the 11 straight months through November, according to the National Association of Home Builders. About 37% of builders surveyed said they cut prices in November, up from 26% in September, NAHB said. Nearly 60% of builders said they used incentives to attract buyers, such as paying lenders to reduce mortgage rates for buyers.
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New home sales, which make up about 10% of all home sales in the United States, are tracked when contracts are signed, while existing home sales are tracked when contracts close. That can make new home sales a leading indicator of where the market is headed.
The median price of new home sales rose to $493,000 in October, the Commerce Department said, up 15.4 percent from a year earlier.
Single-family housing starts fell 21% in September from a year earlier, according to the Commerce Department. However, builders are better prepared for a market slowdown than they were heading into the 2007-2009 recession, because they have been more conservative in recent years about borrowing and owning a lot of land, industry analysts said.