In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses new home sales.
- New home sales (which measure contracts and not closings) fell 0.3 percent in October from the prior month. Sales are still up 17 percent from 12 months ago.
- The Northeast region took a hit with a 32 percent drop. Hurricane Sandy landed towards the end of the month so the drop in the Northeast is more than can be explained by Sandy.
- The inventory of for-sale newly constructed homes is still at what is an essentially 50-year low. Homebuilders are putting up more homes, but are selling whatever is completed without too much trouble. Note though building activity today is only about half the normal pace.
- The median price of newly constructed homes is up from a year ago. Aside from the lower inventory and improving demand conditions, the price of new homes is impacted by material costs and lumber price in particular has been rising in recent months.
- In separate news, mortgage purchase applications to buy a home increased slightly and are up 7.4 percent from one year ago. Applications for refinancing fell a bit, though are sharply higher from one year ago thanks to a measurably lower interest rate environment this year. For mortgage bankers, expect a sharp drop in refinance activity next year when rates slowly rise. Business opportunities will primarily be associated with home buying.