New Home Sales Dipped 4.5 Percent in Oct

MSN Money/CNBC/Reuters ^ | November 26, 2002 10:32:00 AM ET | Staff

[arete]

WASHINGTON (Reuters) - Sales of new U.S. homes slipped in October from their record-setting September pace, dipping 4.5 percent but remaining at a very strong rate as homebuyers continued to be wooed by low mortgage interest rates, the government said on Tuesday.

The Commerce Department said home sales fell to a seasonally adjusted annual rate of 1.007 million units. While that was down from the upwardly revised record of 1.054 million set in September, it was still the third best showing on record. Sales in September had initially been reported at a 1.021 million pace.

Wall Street analysts had expected October's decline. Economists polled by Reuters prior to the report's release had projected a slower 992,000 annual rate.

Sales of both new and existing homes continue to respond to historically low interest rates. The average rate on a 30-year conventional mortgage was 6.11 percent in October, according to mortgage lending giant Freddie Mac, and it has been below 7 percent since March.

On Monday, the National Association of Realtors said purchases of existing homes gained a stronger-than-expected 6.1 percent in October.

The Federal Reserve cut short-term interest rates earlier in the month, dropping the key federal funds rate to 1.25 percent, the lowest level it has been since 1961. While that has helped the housing market, sales of another interest rate-sensitive item, cars, have been choppy, rising one month and falling the next.

The decline in October's new home sales was centered in the Northeast and Midwest regions. New home sales in the Northeast region slid by 32.3 percent to a 65,000 annual rate from September's 96,000 pace. The sharp drop-off was the steepest since January 1996, Commerce said, when a blizzard blanketed the East Coast. Sales of new homes in the Midwest dropped 17.1 percent to a 165,000 annual rate.

In the South, the largest market for new homes, sales increased by 1.2 percent to a 489,000 rate. Sales also gained in the Western region, rising 4.3 percent to a 288,000 annual rate.

Measures of new home values also advanced in October. The average price increased by 4.5 percent to $225,100, while the median sales price -- in the exact middle of the overall distribution of sale prices -- rose a smaller 0.3 percent to $176,700, Commerce said.

Rising prices for new and existing homes have caused some economists to warn of a potential housing ``bubble,'' mirroring the one seen in the stock market in late 1990s. While other analysts have dismissed those concerns as overblown, the October report showed homebuilders do not expect demand to slow down soon.

The months' supply of new homes on the market rose to 4.1 months, the highest since July, while the number of homes for sale at the end of the month was 335,000, the highest since August 1996.

[arete]

Let's see -- we have new home sales slowing, auto sales slowing and business spending down for 7 mths in a row. Yep, everything is just ducky. The recovery is on track. Sir Alan has proclaimed it to be so.

Richard W.

[arete]

FYI

Comments and opinions welcome.

Richard W.

[JmyBryan]

Used home sales jumped by a large percentage.

[arete]

Used home sales jumped by a large percentage.

Foreclosures going back on the market.

Richard W.

[razorback-bert]

Warren Buffett's Berkshire Hathaway Inc. will try its hand at prefabricated house building after announcing it would take control of Oakwood Homes Corp. when it emerges from bankruptcy.

[Always Right]

Yeah, what horrible numbers, just the THIRD BEST month ever. The only reason it fell so much is that it followed the BEST month ever. This is horrible, the sky is falling.........

[Afronaut]

It takes time for the train to stop. And if you know it or not this train is slowing...

[Always Right]

It takes time for the train to stop. And if you know it or not this train is slowing...

Based on one month, during a record year.....puh_leeez. This is like watching Barry Bonds strike out after hitting three home runs in a row and concluding he is washed up.

[RightWhale]

Hmm. Didn't see the part about the economy grew at a surprising 4% the past quarter, far above estimates. Seems like selective reporting.

[IMHO]

Let's see where this might be going:

Two-income families spending up to 50% of their available income on a mortgage with as little as 0% down under historically low interest rates.

What happens if they get divorced, laid off, interest rates rise, or they go upside down in their loan?

That's when we'll see if we have a bubble or not.

OTOH, there was also a real estate bubble after the '29 stock market crash as people attempted to move money from stocks to real estate.

All I've seen is people spending more money buying more expensive houses, not better ones. Some of them are stretched to the limit. And an even greater percentage are counting on continued 20% appreciation rates to bail them out. Kind of like the last days of the stock bubble, huh?

[Wright is right!]

Oddly enough, this exact same "ar-tickle" appeared on the front page of the local lib rag this morning - but with the OPPOSITE headline - "Existing Home Sales Jump 6.1% In October."

Statistics.

Michael

[AmusedBystander]

It takes time for the train to stop. And if you know it or not this train is slowing...

It also takes a while to get one moving, and usually with a few hiccups as well.

[arete]

Here's the article on the economy but it isn't that encouraging. Numbers were boosted by autos and government along with housing. Two of the three are already heading south for the winter so that it looks like the next quarter will be down significantly. Business spending is also off for the 7th month in a row.

US economy storms ahead

Richard W.

[RightWhale]

Right. Looking at the DJIA. Well, it certainly hasn't been booming long enough to say it's a trend. Kind of bouncing along the bottom, but maybe it actually is the bottom. LOR has picked up substantially recently even though showing a loss in their recent quarterly report and not much other news. Perhaps someone is trying to buy them out.