New Home Sales Highest in a Year, Inventory Measure of New Homes Lowest Since 2006

WASH POST –Sales of newly built homes rose to the highest level in more than a year while the supply of these homes dropped to new lows, according to government data released on Wednesday.

Purchases of single-family homes rose 6.2% in October from September to a seasonally adjusted annual rate of 430,000, the Commerce Department reported. The jump was driven solely by the South, the largest new home sales market in the nation. That region, which includes the Washington, D.C. area, posted a 23% gain while sales in other regions slipped.

Meanwhile, the supply of new homes has plummeted to the lowest level in nearly four decades, a promising sign that supply and demand for new homes will soon fall in line and help stabilize home prices.

MP: The months supply of homes at the current sales rate fell to 6.7 months in October, the lowest reading since December 2006 (see bottom chart above), almost three years ago. The balance between supply and demand for new homes is returning to the conditions of a normal housing market, and the October inventory of 6.7 months supply is just slightly above the average inventory of 6.13 months, based on new home sales data going back to 1963.

About Mark J. Perry 262 Articles

Affiliation: University of Michigan

Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.

He holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University in Washington, D.C. and an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota.

Since 1997, Professor Perry has been a member of the Board of Scholars for the Mackinac Center for Public Policy, a nonpartisan research and public policy institute in Michigan.

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1 Comment on New Home Sales Highest in a Year, Inventory Measure of New Homes Lowest Since 2006

  1. We did see some good new home sales data in October, but remember the numbers being reported are “seasonally adjusted” and the unusual spike in new home sales in October that is not normal for the season probably has less to do about demand increasing and more to do with buyers rushing to buy a home before the credits were set to expire on November 30th (now extended)..I did a post with a complete analysis of the raw sales data showing that, based on ACTUAL sales, YTD new home sales are down 24 percent from last year…also almost 80 percent of sales were homes under $300,000 – the post is at:

    http://realestateconsumernews.com/real-estate-market/new-home-sales-in-us-through-october-up-5-1-percent-or-down-24-1-percent-from-a-year-ago-take-your-pick/

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