Sales of newly constructed homes were essentially flat in September, and avoided a decline only because of a sharp downward revision to the August figures.
New single family home sales rose 0.2 percent to an annual pace of 467,000 according to the Commerce Department today. August's sales were revised 7.5 percent lower to 466,000 from 504,000. Economists had forecast a gain to 470,000.
Despite the weak gain September was still the best reading for new home sales since July 2008. Sales were 17.0 percent higher than a year earlier, the third month in a row of double digit annual increases. New home sales account for just 8 percent of the overall housing markets but they are a key driver for the construction industry.
At September's selling rate it would require 5.3 months to clear the inventory of new homes currently on the market, unchanged from the previous month. Six months’ supply is considered normal.
Sales could be helped in the coming months by the decline in mortgage rates. The 30-year fixed rate loan fell as low as 3.93 percent last week, according to Bankrate.com, the cheapest borrowing cost since last June and is down from 4.53 percent at the beginning of the year.
But sales remain far below the annual rate of around 700,000 prevalent in the 1990s in spite of the increase in population.
Another inhibiting factor may be wages that are barely keeping ahead of inflation. Average hourly earnings were just 2.0 percent higher on the year in September, essentially equal to the 1.7 percent price increase.
Last month, new home purchases sank 8.9 percent in the West, removing some of August's 28.1 percent surge. In the South, sales rose 2.0 percent, while they surged 12.3 percent in the Midwest. Sales were flat in the Northeast.
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