Sales rose 6.2 percent to an annual pace of 430,000, the highest level since September 2008, the Commerce Department said today in Washington. The median sales price fell 0.5 percent and the number of unsold homes reached a four-decade low.
Rising demand shows the administration’s incentive for first-time buyers, which earlier this month was extended into next year and expanded to include current owners, may help housing recover from the worst slump since the Great Depression. Home values may remain under pressure as builders are forced to compete with mounting foreclosures as unemployment climbs.
“We are getting some help from the Federal Reserve in terms of low rates, lower prices and of course the tax credit,” said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio. “People are coming off the fence and getting into the market. We have seen a bottom. I’m pretty confident that the turn in the housing industry is behind us.”
Sales were projected to climb to a 404,000 annual pace from an originally reported 402,000 rate in September, according to the median estimate in a Bloomberg survey of 75 economists. Forecasts ranged from 350,000 to 425,000. The government revised September’s reading up to 405,000. Commerce Department also said.
U.S. stocks rose after the report. The Standard & Poor’s 500 Index increased 0.2 percent to 1107.66 at 10:36 a.m. in New York.
Sales in the South
The entire increase in sales was in the South, while the other three U.S. regions registered a decline.
“The South is the largest region by size, accounting for over 50 percent of new home sales, so that the gain is still significant, even though a broader improvement would have been more favorable,” Ryan Wang, an economist at HSBC Securities USA Inc. in New York, said in a note to clients.
The median price of a new home in the U.S. decreased to $212,200, from $213,200 a year earlier.
Sales of new homes were up 5.1 percent from October 2008, the first year-over-year gain since November 2005.
Inventories dropped. The number of homes for sale fell to a seasonally adjusted 239,000, the fewest since May 1971. The supply of homes at the current sales rate decreased to 6.7 months’ worth, the lowest level since December 2006.
While accounting for less than 10 percent of the housing market, new-home purchases are considered a timelier indicator because they are based on contract signings. Sales of previously owned homes, which make up the remainder, are compiled from closings and reflect contracts signed weeks or months earlier.
President Barack Obama this month extended the $8,000 tax credit for first-time homebuyers until April 30 from Nov. 30, and expanded it to include some current homeowners.
Borrowing costs may stay low as Fed policy makers have signaled they will hold the benchmark interest rate near zero for an extended period.
“The housing sector continued to recover, on balance,” central bankers said in minutes of the Nov. 3-4 meeting released yesterday.
Lower rates and stimulus efforts are reviving demand. Existing home sales jumped in October to the highest level since February 2007, the National Association of Realtors reported this week.
The timing of the tax incentive’s extension indicates existing home purchases may jump again this month, decline in December and early 2010, before picking up again, the Realtors group said this week.
The erosion in prices is also abating, the S&P/Case-Shiller home-price index showed yesterday. Home prices in 20 cities rose in September from the prior month, the fourth straight gain. Compared with September 2008, the gauge had the smallest year- over-year decline since the end of 2007.
The labor market needs to turn around to ensure a sustained rebound in housing, according to economists. The unemployment rate, which rose to a 26-year high of 10.2 percent last month, will exceed 10 percent through the first half of 2010, a Bloomberg survey showed.
Foreclosure filings surpassed 300,000 for an eighth straight month in October as rising joblessness made it tougher for homeowners to pay bills, according to RealtyTrac Inc. data.
Companies seeing signs of stability include Home Depot Inc., the largest U.S. home-improvement retailer. The Atlanta- based company’s third-quarter profit beat the average estimate of analysts as it slashed costs, and the chain gained market share.
Home Depot “continued to see signs of stabilization in the markets that were hardest hit by the housing crisis,” Chief Executive Officer Frank Blake said on a conference call with analysts on Nov. 17. “Despite this positive momentum, caution is appropriate.”