New home sales for October came in much stronger than expected Thursday, at a seasonally adjusted annual rate of 986,000, 16% higher than the month before. At the same time, the government revised the previously weak September data upward, suggesting that the slowdown economists originally saw in those numbers hasn't arrived.
Economists polled by
expected October new home sales of 858,000 units.
"The drop in September had been seen as an aberration because of Hurricane Floyd," said Astrid Adolfson, an economist at
The September data were revised upwards by the
U.S. Department of Housing and Urban Development
to 848,000 today, or 8.1% lower than August, from 811,000 as originally reported. The revision indicates that sales of new one-family houses were not as soft as originally thought and that the prior month did not look as weak.
Both Adolfson and Melanie Hardy, an economist at
, had expected an October bounce to 870,000 units, based on rising mortgage applications for new homes and a strong report from the homebuilders' survey of activity for October.
Additionally, the strong number shows that "interest rates need to move a fair amount higher to really bite into the housing sector," said Hardy. "The interest rate increases don't appear to be doing the job."
Federal Reserve Board
has increased its target for the federal funds rate three times this year, raising the rate from 4 3/4% to 5 1/2%. Those moves reversed the rate reductions of the year before.
Hardy added, "We haven't seen any real signs pulling down the economy." In fact, Adolfson warned that the figures released by the
National Association of Purchasing Management
Wednesday indicated that "manufacturing was beginning to enjoy better export orders, so the jury is still out on whether the Fed will have to raise rates again." The factory index was 56.2 in November, continuing its nine-month stay in 50-plus territory.
Kevin Harris, an economist at
, cautioned against leaning too heavily on the October housing data and explained that the November nonfarm payroll jobs report, to be released Friday, is a much more important report. "The Fed has told us to look at trends in the labor market and this report contains an awful lot of data," he said.
The median sales price of new houses sold in October was $159,000 and the mean price was $198,900. At the end of October, the seasonally adjusted estimate of new houses for sale was 312,000. This represents a supply of 3.9 months at the current sales rate.
Through October of this year, there were 791,000 houses sold compared with 755,000 sold during the same period last year. This is an increase of 5%.