Contracts for new, single-family home sales expanded by 6.2% in October to a 685,000 seasonally adjusted annual rate, according to estimates from the joint release of HUD and the Census Bureau. The strongest reading in a decade continues new home sales on a positive growth trend. The expansion is supported by ongoing job growth and improving household formations, as well as tight existing home inventory.
Despite some volatility in the month-to-month sales figures, October marks the sixth month in 2017 at an annual sales pace of more than 600,000. New home sales through October are running 8.9% higher than this time in 2016, in line with NAHB’s forecast.
Inventory increased slightly in October to 282,000 homes for sale. The current months’ supply stands at a healthy level of 4.9. Given tight existing inventory, more new homes are required to meet housing demand.
This is sharply illustrated by the most recent data, which indicate a growing share of homes not-started in builder inventory. For example, on a year-over-year basis, homes under construction in inventory have increased by 10% over the last year. Completed, ready-to-occupy homes (there are only 63,000) are up 7% since October 2016. In contrast, homes not-started listed in inventory have increased 46%.
Sales of homes not-started construction have also been rising, increasing to a 247,000 seasonally adjusted annual rate in October, a 29% annual gain. These factors are consistent with positive housing demand.
Median new home sales price (price of the home in the middle of the distribution) fell to $312,800. Average home price jumped to $400,200. Managing rising construction costs in the months ahead will be a key challenge for housing affordability, as input costs increase. Indeed, strong sales growth was recorded in the $200,000 to $300,000 price class, with such sales up 35% for October 2017 compared to October 2016.
Regionally, there was sales growth in all regions. On a year-to-date basis, home sales are up 30% in the Northeast, up 18% in the Midwest, 6% higher in the West, and up 1% in the South compared to September 2017.