Sales of New Homes Up in October, but Prices Fall
WASHINGTON (AP) — Americans bought slightly more new homes in October, a hopeful sign for the troubled housing market. But the median sales price fell to its lowest level of the year, and the overall sales pace is trailing last year's — the worst in half a century.
The report suggests housing continues to drag on the U.S. economy and is a long way from recovering.
New-home sales increased 1.3 percent last month to a seasonally adjusted annual rate of 307,000, the Commerce Department said Monday. That's less than half the 700,000 that economists say must be sold to sustain a healthy housing market.
September's figures were also revised down significantly to show a weaker pace than first estimated.
Last year's 323,000 new homes sold were the fewest since the government began keeping records in 1963. This year isn't faring much better.
While new homes sales represent a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.
Many builders have stopped working on new projects because they can't obtain financing. The number of new homes for sale in the United States fell in October to a record low of 162,000.
They are also struggling to compete against cheaper re-sales, even as they lower their own prices. The median sales price of a new home fell 0.4 percent in October from September, to $212,300.
Steven Wood, chief economist at Insight Economics, said the small number of new homes for sale should help the housing market recover quicker when prices begin to rise. But he said: "A sustained rebound in new home sales appears unlikely."
For many Americans, buying a home is too big a risk more than four years after the housing bubble burst.
Home prices have tumbled, the job market remains weak and unemployment has been stuck near 9 percent for more two years. Some people who want to buy can't qualify for a loan or make the higher down payments that banks are demanding.
Sales are slumping even though mortgage rates are hovering above historic lows.
Yet sales of previously owned homes are also dismal. They rose slightly last month to a seasonally adjusted annual rate of 4.97 million units, the National Association of Realtors said last week. That's below the 6 million that economists say is consistent with sales in a healthy market and barely ahead of last year's totals, which were the fewest since 1997.
In October, sales were uneven across the country. They increased 22.2 percent in the Midwest and 14.9 percent in the West. But they were unchanged in the Northeast and fell 9.5 percent in the South.