New-Home Sales in U.S. Rebound From One-Year LowLorraine Woellert
Purchases of new U.S. homes rebounded in October from the lowest level in more than a year, signaling buyers are starting to take higher mortgage rates in stride.
Sales jumped 25.4 percent to a 444,000 annualized pace, following a 354,000 rate in the prior month that was the weakest since April 2012, figures from the Commerce Department showed today in Washington. The median forecast of 62 economists surveyed by Bloomberg called for 429,000.
Home sales are regaining strength as gains in employment and stock prices help consumers adjust to this year’s increase in borrowing costs and property values, which have hurt affordability. Builders such Hovnanian Enterprises Inc. are optimistic about the outlook for the market, which will need to expand to meet the needs of a growing population.
“The worst of the impact of higher mortgage rates seems to be behind us,” said Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York, who forecast an increase in sales to 445,000. “If we continue to see improvements in employment and if mortgage rates stay where they are, we should see these levels sustained.”
Economists’ estimates in the Bloomberg survey ranged from 375,000 to 450,000. The 25.4 percent increase from September was the biggest one-month surge since May 1980.
Other reports today showed hiring picked up in November, the trade deficit narrowed in October and service industries grew last month at a slower pace than projected.
Companies boosted payrolls by a more-than-projected 215,000 last month, according to figures from the ADP Research Institute in Roseland, New Jersey. The median forecast of 40 economists surveyed by Bloomberg called for a 170,000 advance. Estimates ranged from gains of 125,000 to 210,000.
The trade gap decreased 5.4 percent to $40.6 billion from a $43 billion shortfall in September that was larger than previously estimated, the Commerce Department also reported. The median forecast in a Bloomberg survey of 63 economists called for a $40 billion deficit. Exports climbed to a record.
The Institute for Supply Management’s non-manufacturing index decreased to 53.9 in November from 55.4 in the prior month, a report from the Tempe, Arizona-based group showed.
Stocks rose as investors speculated the data would influence the timing of the Federal Reserve’s decision to trim stimulus. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,798.34 at 11:03 a.m. in New York.
Today’s Commerce Department report on home sales included combined October and September data after the figures were delayed due to the government shutdown. Purchases were down 6.6 percent in September from a 379,000 annualized pace in August that was weaker than the previously reported 421,000. The revisions and September data indicate the market took a bigger hit than previously estimated following the increase in mortgage rates.
The median sales price decreased 0.6 percent from October 2012 to $245,800, today’s report showed.
Purchases rebounded in all four U.S. regions in October, led by a 34 percent jump in the Midwest.
The supply of homes dropped to 4.9 months from 6.4 months in the September which was the highest since August 2011. There were 183,000 new houses on the market at the end of October, down from 190,000 the prior month that was the most since December 2010.
New-home sales, tabulated when contracts are signed, are considered a timelier barometer than purchases of previously owned dwellings, which are calculated when a contract closes. New construction accounted for about 7 percent of the residential market in 2012.
In one sign of growing momentum, applications for building permits reached a five-year high in October. Permit requests rose 6.2 percent to a 1.03 million annualized rate, the most since June 2008, after a September pace of 974,000, the Commerce Department reported last week.
The surge was paced by a jump in applications for apartments and condominiums, which increased 15.3 percent after a 20.1 percent gain in September.
The annual pace of existing home sales fell in October to 5.12 million, the lowest level in four months, with buyers constrained by a limited supply and higher mortgage rates, the Realtors group reported last month. There were 2.13 million previously owned homes for sale at the end of October, down from 2.17 million the month prior.
Builders see plenty of room for growth, said David G. Valiaveedan, vice president for finance at Hovnanian Enterprises Inc. based in Red Bank, New Jersey. At the market peak in 2005, builders began work on more than 2.2 million homes, compared with an average 907,000 annualized pace per month in 2013 through August. The industry “is way under-producing the long-term demand,” he said.
“The experience of the last cycle in terms of the depth and length of the recession in housing has been a lot different than previous cycles,” Valiaveedan said at a Nov. 14 conference. “We firmly believe we have a lot of runway ahead of us and a lot of opportunity.”