New Home Sales Show Much Stronger Than Expected Growth In October

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New home sales increased by much more than expected in the month of October, according to a report released by the Commerce Department on Wednesday, with the report also showing an increase in sales compared to the same month a year ago.

The report showed that new home sales rose 6.2 percent to an annual rate of 430,000 in October from the revised September rate of 405,000. Economists had expected sales to edge up to 404,000 from the 402,000 originally reported for the previous month.

With the bigger than expected increase, new home sales were up 5.1 percent compared to the October 2008 estimate of 409,000.

Joel Naroff, chief economist at Naroff Economic Advisors, said, "New homes sales followed existing home sales upward as the fear of expiring tax credits lifted all markets."

The bigger than expected increase in new home sales was largely due to a jump in sales in the South, where new home sales rose 23.2 percent in October.

On the other hand, new home sales in the Midwest fell by 20.0 percent, and new home sales fell by 5.1 percent in both the Northeast and the West.

The report also showed that the estimate of new houses for sale at the end of October was 239,000, down 4.4 percent from 250,000 in September. This represents a supply of 6.7 months at the current sales rate compared to 7.4 months of supply in the previous month.

With the decrease, the months of supply fell to its lowest level since December of 2006, well off the peak of 12.4 months in January.

The Commerce Department added that the median sales price of new houses sold in October was $212,200, down 0.5 percent compared to the same month a year ago but up 0.7 percent from September.

On Monday, the National Association of Realtors released a report showing that existing home sales in the month of October increased by much more than expected, with the sales growth driven by the first-time homebuyer tax credit.

The report showed that existing home sales jumped 10.1 percent to an annual rate of 6.10 million units in October from a downwardly revised 5.54 million in September. Economists had expected sales to rise to 5.70 million from the 5.57 million originally reported for the previous month.

Lawrence Yun, NAR chief economist, said, "Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November."

While the first-time homebuyer tax credit had been due to expire at the end of November, President Barack Obama signed a bill earlier this month that extended and expanded the tax credit.

The bill extends the $8,000 first-time homebuyer tax credit through April 30, 2010 and expands it to include a $6,500 credit for people who have lived in their current homes for at least five years.

New home sales increased by much more than expected in the month of October, according to a report released by the Commerce Department on Wednesday, with the report also showing an increase in sales compared to the same month a year ago. The report showed that new home sales rose 6.2 percent to an annual rate of 430,000 in October from the revised September rate of 405,000. Economists had expected sales to edge up to 404,000 from the 402,000 originally reported for the previous month. (Market News Provided by RTTNews)