Sales of new homes in October were much stronger than expected and rose to record rates, signaling that consumers might be rushing to buy homes before mortgage rates get too high.
The U.S. Department of Commerce said Tuesday that sales of new homes in October rose 13% from the September annualized rate. The seasonally adjusted annual rate for October was 1.42 million, topping July's record of 1.37 million and surpassing September's revised rate of 1.26 million. The October pace was 9% above the rate from a year earlier.
Economists were expecting new-home sales to drop to a 1.2 million rate in October, according to Reuters. The 13% rise in the sales rate was the highest monthly jump since 1993, according to Wachovia research.
Sales prices also remained strong. The median sales price of new homes sold in October rose to $231,300 from $229,200 a year ago. The revised September median sales number was $227,700.On the inventory side, the total level of homes for sale increased slightly, while the monthly supply rate dropped due to the increased sales pace. The seasonally adjusted estimate of new houses for sale at the end of October was 496,000, which represents 4.3 months of supply at the current sales rate. This was a drop from the 4.7 months of supply at the end of September, when an estimated 490,000 new homes were for sale. Industry watchers said the strong new-home sales point to consumers looking to buy a home before mortgage rates rise further after more expected rate hikes by the Federal Reserve. "I think part of it is some fence sitters jumping in the market here," says Nick Buss, senior vice president with PNC Real Estate Finance, which provides financing to homebuilders. "I think everyone agrees the sub-6% (mortgage) rate is probably gone for a while."