New home sales rebound in October

New home purchases rose sharply in October as the housing recovery chugs along, showing signs of picking up pace. 

Sales of new homes increased 25.4 percent to a seasonally adjusted annual rate of 444,000, bouncing back from three months of declines, the Commerce Department said Wednesday.

Commerce also reported that sales dropped 6.6 percent in September.

{mosads}The government released both reports together because of delays caused by the 16-day government shutdown in October.

While the October figure represents the largest monthly percentage increase in 33 years, sales are still well below the 700,000 that reflect a healthy market. 

“The strong October results return us to the sales levels we saw earlier this year and negate the pause caused by the sudden jump in interest rates,” said David Crowe, chief economist for the National Association of Home Builders.

“We expect sales to continue to rise as pent up demand is released and first-time home buyers creep back into the market.”

The latest report revised August and July sales down, to 379,000 and 373,000, respectively.

Mortgage rates had ticked up a percentage point over the summer, forcing a slowdown in sales. But interest rates have moderated and are hovering around historic lows, around 4 percent on a 30-year-fixed loan. 

In addition, tight supply had pushed up prices, but they have started to level out.

Prices in October fell 4.5 percent, to $245,800.

“The October sales numbers show that there is clearly a demand for new housing and the recovery remains on track,” said Rick Judson, chairman of the NAHB and a home builder from Charlotte, N.C.

“However, the recovery continues to be slowed by political uncertainty in Washington and ongoing constraints builders face with regard to tight credit conditions for consumers and the availability of labor, lots and materials.”

In October, the number of new homes for sale fell to 183,000 about a five-month supply. 

Meanwhile, all four regions posted double-digit sales gains in October.

Sales rose 19.2 percent in the Northeast, 34 percent in the Midwest, 28.2 percent in the South and 15.2 percent in the West.