New-Home Sales Edge Up In October

New single-family home sales edged up 1.7 percent in October following a dramatic downward revision to the preliminary estimate for September, the U.S. Commerce Department reported today. October's seasonally adjusted annual rate of 728,000 units was 23.5 percent below a year ago.

"The progressive tightening of mortgage lending conditions during 2007 has been the major factor behind the setback in home sales this year," said David Seiders, chief economist at the National Association of Home Builders (NAHB). "NAHB expects home sales to begin a gradual recovery in the early part of 2008."

"For this pattern to materialize, the U.S. economy must avoid recession and conditions in the mortgage finance system must improve. We are looking to the Federal Reserve to implement at least two more cuts in short-term interest rates to ensure that those conditions are met," Seiders said.

The regional patterns of new-home sales in October were mixed. New-home sales increased 1.8 percent in the Northeast, 14.2 percent in the Midwest and 6.8 percent in the South. Sales were down by 15.7 percent in the West. All regions but the Northeast were down substantially on a year-over-year basis.

The inventory of new homes for sale was down 2.3 percent to 516,000 units in October as builders continued to work down their inventory. The equivalent months' supply at the October sales pace edged down to 8.5 months from 9.0 months in September.

Completed homes for sale were about 37 percent of the inventory, while units still under construction represented almost 49 percent of the inventory and units for-sale that were permitted but not yet started represented more than 14 percent of the inventory level.

The median length of time that completed homes were on the market was 5.9 months in October, up slightly from 5.8 months in September.