New-home sales are finally starting to catch up with builders optimism, as the Commerce Department reported Monday the sale of newly-built, single-family shot up by 10.7 percent in October. On the year, new-home sales are running 15.7 percent ahead of 2014.
In October, new-home sales rose to a seasonally-adjusted rate of 495,000 units. This is welcome news considering builders have already been ramping up construction of new homes in recent months thanks to an improving overall economy and pent-up demand. Tom Woods, chairman of the National Association of Home Builders, indicated things are full-steam ahead in the new-home sector.
“Our builders are reporting continued optimism in the housing market, and are adding inventory in anticipation of future business,” Wood said.
To illustrate that point, the Commerce Department reported the inventory of new homes increased by 1.3 percent in October to 226,000, which is the highest since March 2010. At the current rate, it would take 5.5 months to exhaust the supply of new houses on the market.
The median price of a new home in October was $281,500, which was down 6% from $299,400 in October 2014.
New home sales account for only about 8% of the total housing market, and they can be very volatile from month-to-month. With that said, this latest news is very encouraging. It is going to take a wider supply of available homes to moderate the rapid price appreciation that’s defined the housing market the last couple of years.