New Home Sales Fall 0.3% in October

By Stevie Duffin Updated on 12/14/2012

By Daniel Duffield

New home purchases in the U.S. have abruptly decreased in October, demonstrating the inadequate development of the real estate market recovery.

Sales declined 0.3% to an annual average rate of 368,000 after September’s revised rate of 369,000 that turned out to be less strong than originally projected, according to figures from the Commerce Department in Washington. These figures fall incredibly short of the previously expected pace of 390,000.

Within the last six months, purchases have increased 2.8%, illustrating the restricted growth of employment rates and job production, as well as tight credit within the housing market. These statistics support Ben S. Bernanke’s views that the housing market is integral to economic recovery in the U.S.

According to Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, who projected a rate of 365,000 home sales, economic recovery following the job recession must begin with the job creation and growth to recover lost ground within the past few years.

However, purchases rose within two of the four regions last month, swelling 62.2% in the Midwest and reaching a three-year peak. In the west, sales increased 8.8%, averaging at the highest rate since July of 2008.

Despite these promising increases, home purchases fell 32.3% in the Northeast region, although the Commerce Department has stated that the effects of Superstorm Sandy were “minimal.”

Home supply in October rose to 4.8 months considering the current sales pace. Increasing from 4.7 in September, 147,000 new houses hit the market at the end of October compared with 145,000 to end September.

New home sales, calculated after contracts have been signed, have largely been considered a more effective measuring tool than pre-existing home purchases, which are determined following the closing of the contract. In 2011, recently built homes comprised 6.7% of the residential market, declining from a 15% high during the prosperous period of the previous decade.