New-Home Sales Jump A 'Surprising' 13 Percent In October

November 29, 2005 - Sales of new single-family homes jumped a surprising 13.0 percent to a record seasonally adjusted annual rate of 1.424 million units in October, the U.S. Commerce Department reported today. The October sales pace was 9.0 percent above a year ago.

“Home builders continue to see healthy demand for new homes and expect sales activity to continue at slightly more moderate levels in the months ahead,” said David Wilson, president of the National Association of Home Builders (NAHB) and a custom home builder from Ketchum, Idaho. “Our monthly Housing Market Index surveys of builders show that a majority have maintained a positive view of future sales but that builder sentiment has moved down from mid-year highs.”

“The great strength of new-home sales in October was surprising,” said NAHB Chief Economist David Seiders. “The upshift in interest rates may have pushed a lot of fence sitters into a buying mode, and builders may have deepened sales incentives to counter growing buyer resistance to home prices and interest rates. But it’s also likely that today’s report overstates the true pace of home sales because of well-know statistical deficiencies.”

“The Commerce Department’s monthly estimates of home sales are subject to a high degree of sampling variability as well as substantial revision, especially on a regional basis,” Seiders noted. “Indeed, the statistical confidence intervals around sales estimates for the Northeast and West regions are particularly wide, and these regions drove the national sales numbers sharply upward in October. More data will be required to assess the true condition of the housing market as we move ahead.”

Three of four regions across the country posted increased sales of new homes in October, with two regions, the West and the Northeast, experiencing the most dramatic rises. Sales in the West jumped 46.9 percent and sales in the Northeast were up 43.3 percent from the month before. Sales in the South increased a modest 1.9 percent and sales in the Midwest dropped 9.5 percent.

The inventory of new homes for sale was 496,000 at the end of October, a 4.3 months’ supply at the current sales pace. Of that total, for-sale units that were not yet started represented 20 percent. Units still under construction were 59 percent of the inventory, and completed homes for sale were 21 percent of the total ¯ a smaller proportion than a year ago.

“For additional information please visit www.HousingEconomics.com by NAHB, the Economics Publication for America's Housing Industry.”