Sales of New Homes Remain Near Nine-Year High

Purchases of new homes in September stayed close to an almost nine-year high, showing residential real estate was maintaining momentum heading into the quieter selling season.

Sales climbed 3.1% to a 593,000 annualized rate from an August pace that was weaker than initially reported, Commerce Department data showed Wednesday. The median forecast in a Bloomberg survey called for 600,000 pace in September. Purchases in June and July were revised lower.

Durable employment gains and historically low mortgage rates are combining to lift housing demand, paving the way for homebuilding to contribute to economic growth. An acceleration in incomes and construction of entry-level properties would help provide an additional spark for the market.

Estimates ranged from 518,000 to 662,000. The Commerce Department revised the August reading down to a 575,000 pace from a previously estimated 609,000. July was revised to a 629,000 rate, still leaving it at the fastest since November 2007.

The revisions over the previous three months underscore the data’s volatility, one reason economists prefer to look at longer term trends. The report said there was 90% confidence the change in sales last month ranged from a 13.1% drop to a 19.3% increase.

The pickup in September demand was helped by an 8.6% gain in the Midwest and a 3.4% increase in the South. Sales also rose in the Northeast and fell 4.5% in the West.

The supply of homes fell to 4.8 months, from 4.9 months in August. There were 235,000 new houses on the market at the end of September, little changed from the previous two months.

The median sales price of a new house rose 1.9% from September 2015 to $313,500, Wednesday's report showed.

New-home sales, which account for about 10% of the residential market, are tabulated when contracts are signed. That makes them a timelier barometer than transactions on existing homes.

Purchases of previously owned home sales increased more than projected in September, National Association of Realtors data showed last week. Demand climbed 3.2% to a 5.47 million annual rate, even as a lack of inventory continues to limit options and home prices rise faster than incomes.

The residential real estate market still is supported by job-market improvement and cheap mortgage rates. The average 30-year fixed-rate mortgage was 3.52% in the week ended Oct. 20, holding near the record-low 3.31% reached four years ago, according to Freddie Mac figures dating to 1971.