New Home Sales Down in October

The Commerce Department released its October report on new home sales on Wednesday, indicating that sales of newly built homes fell 8.1 percent in the month to a seasonally adjusted annual rate of 283,000. It was the fourth time in six months the measure has declined.

Economists participating in a recent survey had forecast that new home sales would rise in October by 2.3 percent to a 314,000 annual rate. The figure reported Wednesday is a staggering 28.5 percent lower than in October of last year.

Buyers are staying on the sidelines because of high unemployment, strict lending standards, and uncertainty about which way home prices will go. A separate report showed that existing home sales are likewise struggling. They slid by 2.2 percent in October to an annual pace of 4.43 million, according to the National Association of Realtors, though the drop was less than analysts had forecast. Allegations of faulty and improper paperwork in foreclosure cases have led to a number of banks temporarily halting seizures, delaying the closing of some deals and driving down sales figures.

Earlier in the year, the government lured buyers into the market with tax credits, but those credits expired in April, driving down sales in the following months. Sales of new homes fell more than 30 percent in May after the credits expired, and sales have been particularly volatile since. In October, for example, the annual pace of new home sales was just incrementally higher than it was in May.

While new home sales fell for the majority of the country, the South actually posted a gain of 3.1 percent in the measure. Sales fell 12.1 percent in the Northeast, 20.4 percent in the Midwest, and 23.9 percent in the East. The median price of homes sold, meanwhile, fell 9.4 percent year-to-year to $194,900. That’s only $800 higher than the median sales price for homes in October 2003.

The number of new homes listed for sale in October fell 0.5 percent to 202,000, a supply of 8.6 months at the current pace of sales. Economists consider a supply of six months an indicator of a healthy market.