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U.S New-Home Sales Fall In October

By Arthur Greene November 24, 2016
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The U.S. Census Bureau and the Department of Housing and Urban Development reported on Wednesday morning that sales of new homes in October slipped to a seasonally adjusted annual rate of 563,000, a decrease of 1.9% below the revised September rate of 574,000 and an increase of 17.8% compared with the October 2015 rate of 478,000. The consensus estimate from a survey of economists expected a rate of around 601,000.

The release overall was slightly disappointing and will lead to some speculation that the new-housing sector is starting to cool, although the data overall is still solid and there may have been some substitution into existing homes.

Though the first 10 months of the year, sales were up 12.7% compared with the same period in 2015. That measure was more consistent with other gauges of the housing market showing improvement through most of this year.

Regionally, the West was the one gainer, with an 8.8% gain to an annual pace of 148,000. The South declined 3% to a pace of 322,000; the Midwest was off 13.7% to 63,000; the Northeast fell 9.1% to 30,000. Year over year, however, the West was up 28.7%, the South up 17.9%, the Midwest up 8.6% and the Northeast down 6.3%.

“Although median house prices dropped in October, this is explained by seasonality – with the 12-month change in prices still positive,” Nationwide Chief Economist David Berson said.

 “Supply conditions continue to be tight with only 5.2 months of inventory, but recent housing starts data show that the pace of home construction is picking up with demand conditions expected to stay strong, residential construction will need to keep pace in order to support further sales growth” Berson said.

However, this does not hold true for all homes on the market. Home prices increased in the third quarter, showing that the deceleration in home prices during the second quarter was short-lived, according to the Federal Housing Finance Agency Home Price Index.

Rising interest rates following the elections had no effect, of course, on October sales or prices, but now that mortgage interest rates have parked above 4% for a week there is likely to be some effect on November sales, even though rates remain near historic lows.

The dollar maintained a strong tone following the data with no significant pull-back as EUR/USD dipped to test December 2015 lows near 1.0540. Treasures attempted to stabilise, but were still down by 20 ticks on the day with US equities slightly weaker.

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By Arthur Greene November 24, 2016

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