Sales of new single-family homes took a significant turn downward in October as seasonal factors combined with a continuing hangover from the expired federal home-buyer tax credit.
The Commerce Department reported Wednesday that new-home sales fell 8.1% to a seasonally adjusted annual pace of 283,000, 28.5% (±12.6%) below the October 2009 estimate of 396,000. Wall Street was expecting a rate of 313,000.
Prices also slid. The median price of new houses sold in October fell 13.9% from September and 9.4% from October of last year to $194,900. The average sales price of $248,200 was 8% below September.
The seasonally adjusted estimate of new houses for sale at the end of October was 202,000, an 8.6-month supply, up from 8.5% in September.
The results were worse across the arc stretching from the east coast through the north down the west coast, with the Northeast down 12.1% from September, the Midwest down 20.4% and the West down 23.9%. Those three regions were partially offset by a 3.1% gain in the South, which was bigger than the other three combined in terms of sales.
Compared to October last year, the Northeast was down 12.1%, the Midwest down 27.8%, the South down 23% and the West down 46.9%.
Michael Rehaut at J.P. Morgan took the report in stride. In a reseach note, he wrote, "Importantly, we note that while some of this decline may have been foreshadowed by the MBA Purchase Applications 5% decline in October, we also note that this data series continues to be beset with relatively large revisions of prior months (we note August was downwardly revised from 288K to 275K) and hence believe this month¹s data point could potentially be modestly revised upwards next month. Overall, however, even if this month¹s data point ultimately stands, we view it as part of a stable to slightly improving demand trend following the expiration of the tax credit earlier this year."
Stephen East of Ticonderoga Securities took a similar view, pointing that on an anadjusted basis, the numbers were not as dismal. In a note to investors, he wrote, "While the headline metrics are obviously a disappointment, looking below the headline, the data is not quite so disappointing. In combination with the jobs numbers and Michigan Consumer Index results, we believe flattish new home sales on a not seasonally adjusted basis and declining absolute inventory are likely the reasons why the builder equities have held their gains so far this morning. An encouraging sign, it appears that the market has taken a forward looking position with regard to today's release in lieu of driving by the rear view mirror."