Sales of new U.S. single-family homes rose for a third straight month in October, but a downward revision to the prior month’s sales pace indicated the housing market recovery would remain gradual. The Commerce Department said on Wednesday that sales gained 0.7 percent to a seasonally adjusted annual rate of 458,000 units. September’s sales pace was revised down to 455,000 units from 467,000 units.
Economists polled by Reuters had forecast new home sales rising to a 472,000-unit pace last month. New home sales, which account for about 8 percent of the housing market, tend to be volatile month to month. Compared to October last year, sales were up 1.8 percent. Housing remains constrained by slow wage growth, which is resulting in a slow pace of household formation.
Last month, new home sales rose 7.1 percent in the Northeast and surged 15.8 percent in the Midwest. In the populous South, sales fell 1.9 percent and were down 2.7 percent in the West. With sales rising modestly, the stock of new houses available on the market rose 1.0 percent last month to the highest level since June 2010. At October’s sales pace it would take 5.6 months to clear the supply of houses on the market, up from 5.5 months in September. Six months’ supply is normally considered a healthy balance between supply and demand. The median new home price jumped 15.4 percent from a year ago to a record $305,000.
Many believe that the US housing sector is no doubt in recovery mode, but the pace of recovery is somewhat stagnant. Economists believe that the stagnating housing sector can keep the Federal Reserve from hiking short term interest rates in the near future as it was the bursting of the housing bubble that had caused the recession in 2008-09.