Even with higher interest rates and lower affordability, sales of new single-family homes in the United States posted their biggest jump in more than three decades.
The latest average rate on a 30-year fixed mortgage was 4.29 percent, which is still close to historic lows.
Today, the U.S. Census Bureau reported that purchases of new homes, measured by contracts signed, increased 25.4 percent to a seasonally adjusted 441,000-unit pace in October, compared to the September rate of 354,000 units. That is the biggest gain since 1980. Home sales were up 21.6 percent from a year earlier, but as the chart above shows, the housing market is still far below its glory days.
The results were better than expected. On average, economists estimated home sales to come in at a 425,000-unit pace. However, purchases of new homes in July and August were the two weakest months this year, while the pace of sales in July was the worst month since October 2012 and the biggest miss of expectations since May 2010. Adding insult to injury, sales in July and August were revised lower by a total of 59,000 units.
There were an estimated 183,000 new homes for sale at the end of October. This is estimated to be a 4.9 month supply at the current rate of sales, about the same as one year earlier when there were 146,000 available homes.
Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to National Association of Home Builders.
The U.S. Census Bureau and the Department of Housing and Urban Development released their joint report on new home sales in September and October as the regular September report was not issued in October due to the government shutdown.