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October New Home Sales Dip After Downward Revision for September

New home sales barely budged in October, dropping 0.3 percent to 368,000 after September’s report was revised sharply downward from an original 389,000 to 369,000, the ""Census Bureau and HUD"":http://www.census.gov/construction/nrs/pdf/newressales_201210.pdf reported Wednesday. Economists surveyed by Bloomberg expected the report to show a sales pace of 387,000.

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Both the average and median price for a new home fell from September but remain sharply higher than October 2011.

Sales for July were also revised downward to 366,000 from the last report of 373,000, changing the momentum of new home sales. In the original report, sales had reached a 30-year high. This report is likely to dampen the enthusiasm of builders, who have seen the Housing Market Index compiled by the National Association of Home Builders increase steadily from 24 in April to 46 in November. While the current sales component of the index has seen a similar increase (25 in April to 49 in November) the buyer traffic component, which tracks visitors to model homes, has been relatively flat for the last three months at 35 after jumping from 23 in April.

Even with the slow growth in October, sales are up 17.2 percent from October 2011. However, the year-over-year gain was weaker than the 25.3 percent annual growth reported for September.

This report is based on sales contracts, not closings, and Hurricane Sandy may have had an impact, as sales dropped sharply in the most heavily impacted areas: the Northeast, where sales were down to 21,000 from September’s 31,000, and the South, which saw sales drop from 199,000 in September to 176,000 in October. New home sales rose in October to an annual pace of 60,000 in the Midwest from 37,000 in September, a statistical correction since home sales in the region averaged about 50,000 in the 12 preceding months. Home sales in the West rose to 111,000 in October from 102,000 in September.

The parallel report from the National Association of Realtors--its Pending Home Sales Index--will be issued Thursday.

The number of new homes for sale at the end of the month rose to 147,000 from 145,000 in September, adding pressure to prices. Builders completed 542,000 single-family homes in October, up from 524,000 in September.

The increase in inventory added pressure to prices, and indeed both the median and average price of a new home dropped for the second month in a row. The month-over-month drop in the average price--affected by the range of home sales--was the largest since February 2011 and the monthly decline in the median price the steepest since last November.

Homes with price tags of less than $300,000 represented 69 percent of October sales, up from 65 percent in September.

This sales report could be reflected in builder activity. Permits for new single family homes rose in October to a seasonally adjusted annual rate of 562,000 from 550,000 in September, while October starts were reported as 594,000, essentially flat to September’s 595,000.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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