New home sales defied expectations in October, according to the latest data from the Census Bureau, jumping 7.5% from September to a seasonally adjusted rate of 632,000, as an overall lethargic housing market continues to show signs of life.
“Although homebuilder confidence has fallen to a decade low, there are still bright signs in the new home market,” said Dr. Lisa Sturtevant, Bright MLS chief economist, in a statement. “Though there has been a lot of talk about a recession in the housing market and homebuilders continue to be gloomy, things might not be as bad as builders say they are given the October sales numbers.”
Mixed signals have characterized this market since at least the summer. Existing home sales fell sharply again in October, and leading data on permits and housing starts have also been uneven.
A deeper dive on the latest new home sales data showed some of these same contradictions. Region made a tremendous difference, as sales in the Northeast exploded, rising 45.7% from September, while Midwest new home sales plummeted an equally dizzying 34.2%.
Price point also seemed to make a difference, as new homes in the $300,000 to $399,999 range fell sharply as a proportion of the whole, making up only 18% of the total—down from 27% last month. Conversely, homes priced between $500,000 and $749,999 gained significantly, making up 33% of sales, up from 27%.
Homes that had not yet started construction also increased in sales, with 184,000 of those units sold in October, up from 102,000 in September. Prices also rose overall, with the October median sales price for a new home coming in at $493,000, compared to $455,700 in September.
All of this adds up to a market that has proven impossible to predict, with many pundits predicting an all-out crash proved wrong (so far), and plenty of moving parts to track going into the new year.
Sturtevant says this blend of uncertainty and hope is driving the narrative in home sales, with a lot still depending on mortgage rates that remain historically volatile.
“Home builders have seen the writing on the wall as buyer traffic dries up at the end of the year. But instead of dropping prices, builders are offering more incentives,” she said. “They are still hoping that mortgage rates peaked in 2022 and that demand will improve in the spring.”
