The US Census Bureau just released a report on new home sales that was delayed by the government shutdown. Despite the late timing of the data, there were no signs of any ill effects stemming from that shutdown. Indeed, the report shows that the month of that shutdown - October - was a particularly strong one for new home sales.
There had been concern that October's government shutdown and debt ceiling debate would put a damper on many forms of economic activity, including home buying. That's not the only obstacle the housing market faced, since current home loan rates are now significantly higher than they were earlier in the year.
According to mortgage finance company Freddie Mac, 30-year fixed mortgage rates averaged 4.19 percent in October, after having averaged less than 4 percent for the first five months of the year. Despite this, there were several positive signs in October's new home sales report. Here are five key points from that report:
- Sales volume posted an impressive gain. 444,000 new homes were sold in October, making it the best month since June. Year-over-year, October's new homes sales represented a very healthy 21.6 percent increase.
- Prices rose, but affordable housing remains plentiful. Mean new home prices were up by 12.7 percent year-over-year, to $321,700. That's an indication of health in the market, but not so much that the average new home buyer will be shut out by high prices. The median home price, at $245,800, was close to flat year-over-year. When the mean price rises faster than the median, it suggests that there are greater price increases in the high end of the market than among rank-and-file properties.
- Supply is consistent with sales volume. As of October, there were 4.9 months worth of new homes on the market, similar to the 4.8 months worth of supply available in October of 2012. This figure had risen during the summer months, but dropped from 6.4 months worth of supply to 4.9 months in October. As long as an oversupply does not build up, there is less chance of a sudden reversal in prices.
- Demand seems to be strengthening. While supply has kept pace with sales volume, demand seems to be heating up. In October of 2012, the average new home was on the market for 3.8 months before it sold; this October, the average new home spent just 2.6 months on the market.
- The South is hot; the West is not. Unfortunately, the strength in new home sales is not being enjoyed equally across the nation. At 41.5 percent, the South enjoyed a year-over-year increase in new home sales volume that was nearly twice the national average. The Northeast, which has been one of the weakest markets, also had an above average recovery in volume over the past year. The picture is less encouraging in the West. New home sales in the West declined by 14.2 percent year over year, as sales volume dropped from 106,000 to 91,000. At least that 91,000 new home sales this October represented an improvement from August and September, but real estate professionals should be nervously watching to see if that improvement can continue, or if the numbers will fall back into decline.
Despite some concerns in the West, the overall numbers point to a healthy housing market. Of course, this report just measures sales activity for newly-built homes - it does not capture the status of existing home sales. However, the strength of new home sales helps allay the fears that a flood of foreclosed properties would swamp the market at the expense of other home sales. It seems that in this respect, as in shaking off the government shutdown and the demise of low mortgage rates, the housing market has been surprisingly resilient.