The Commerce Department reported today that the sales of new homes dropped by 0.3 percent to 368,000 units (seasonally adjusted annual rate) in October. The sales rate was lower than 369,000 units posted last September.
According to agency, the 368,000 home sales for the month of October this year is 17.2 percent higher than the 314,000 units recorded during the same month in 2011.
The median sales price for new houses sold was $237,700, and the average sales price was $278,900 in October 2012. The median sales price is 5.7 percent higher than the median sales price last year, which indicates that the housing sector is growing slowly.
The estimated number of available new houses for the month was 147,000. The supply will last for about 4.8 months.
According to the Commerce Department, hurricane Sandy had a minimal effect on the sales activity, and it did not affect the agency’s data collection last month.
Economists still believe that the housing market will have a positive recovery despite the decline of home sales in October. According to Yelena Shulyatyeva, economist at BNP Paribas SA (EPA:BNP) in New York, "Despite the downward revisions, new home sales and the housing market in general are on the right path. It's just that progress will be slow."
John Ryding and Conrad DeQuadros, economists at RDQ Economics in New York told investors that the new home sales data are volatile and revision prone, but they maintain their position the housing market is recovering. According to them, “We are not changing our view that a modest recovery in home sales, construction activity, and prices is well under way.”
On the other hand, Scott Brown, chief economist at Raymond James and Associates opined that the key for the full recovery of real-estate market is to have a better jobs growth.
MKM Partners in a research report state that the miss appears to be at least partly due to the effects of Hurricane Sandy, which caused sales to drop by nearly one-third in the Northeast. Importantly, months of sales for both new (4.8) and existing (5.4) homes suggest that the incipient upswing in pricing and construction will continue. From a market monetarist perspective, a sustained recovery in housing and confidence from a low base may help to ease the excess-demand-for-money problem, leading to faster NGDP growth and job creation. The “fiscal cliff” could work in the other direction if it were to precipitate a velocity shock, but an open-ended expansion of the monetary base (QE3) focused on proxies for NGDP (unemployment and inflation) reduce the risk of such an eventuality.
Federal Reserve Chairman, Ben Bernanke vowed that they would continue to implement the policy tools they have to support the economic recovery during a speech last November 15, in Atlanta.
Bernanke also cited, “the overly tight lending standard might be preventing credit worthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery. ”
A separate report from the Mortgage Bankers Association showed that the seasonally adjusted index for mortgage applications declined by 0.9 percent, refinancing applications dropped by 1.percent while loan request for home purchases, increased by 2.6 percent for the week that ended November 23.