Record October Sales May Overstate Market Strength
Sales of new single-family homes jumped an unexpected 13.0% to a record seasonally adjusted annual rate of 1.424 million units in October, the U.S. Commerce Department reported last week, leaving the month’s sales pace 9% ahead of the rate a year earlier.
“Home builders continue to see healthy demand for new homes and expect sales activity to continue at slightly more moderate levels in the months ahead,” said NAHB President David Wilson. “Our monthly Housing Market Index surveys of builders show that a majority have maintained a positive view of future sales but that builder sentiment has moved down from mid-year highs.”
“The great strength of new-home sales in October was surprising,” said NAHB Chief Economist David Seiders. “The upshift in interest rates may have pushed a lot of fence sitters into a buying mode, and builders may have deepened sales incentives to counter growing buyer resistance to home prices and interest rates. But it’s also likely that today’s report overstates the true pace of home sales because of well-know statistical deficiencies.”
Seiders noted that the Commerce Department’s monthly estimates of home sales are subject to a high degree of sampling variability and can be revised substantially, especially on a regional basis. “Indeed, the statistical confidence intervals around sales estimates for the Northeast and West are particularly wide,” he said, “and these regions drove the national sales numbers sharply upward in October. More data will be required to assess the true condition of the housing market as we move ahead.”
Sales for October surged 46.9% in the West and 43.3% in the Northeast. They climbed a modest 1.9% in the South and dropped 9.5% in the Midwest.
There was a 496,000-unit inventory of new homes for sale at the end of the month, which was equivalent to a 4.3-month supply at the current sales pace. For-sale units that had not yet been started represented 20% of the total inventory. Units still under construction accounted for 59%, and completed homes for sale were 21% ― a smaller proportion than a year ago.
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