New-home sales increased modestly in October, according to data from the United States Census Bureau released Wednesday.
Sales of newly built homes climbed 7.5 percent between September and October to a seasonally adjusted rate of 632,000, but remained 5.8 percent below the October 2021 rate 0f 671,000, according to census data.
The bump in sales went against expectations, with economists previously projecting that sales would fall to 570,000 in October.
The October increase comes after sales of new homes dipped 10.9 percent in September, and recorded a dramatic 28.8 percent increase in August.
The median price of new homes sold in October clocked in at $493,000, while the average sales price stood at $544,000, according to the Census Bureau.
The seasonally adjusted estimate of new homes for sale at the end of October rose to 470,000 from 462,000 at the end of the previous month.
Experts predicted a steady rise in inventory as more homes sit on the market for longer due to market uncertainty.
“The current period of uncertainty will likely cause inventories of unsold homes to grow from here and will lengthen the time it takes to transact,” Al Otero, a portfolio manager at Armada ETF Advisors wrote in an emailed statement.
The jump in sales was driven primarily by a dramatic increase in sales of new homes in the Northeast, where sales were 45.7 percent higher than they were the previous month, and in the South where they were 16 percent higher than in September.
The Midwest saw sales of new homes decline 34.2 percent, while the West charted an 0.8 percent decline.
With high mortgage rates expected to be the norm through 2023 at the very least, it’s unlikely that sales will see any long term acceleration, but some buyers are managing to take advantage of the low demand market.
“With home prices up more than 13% from a year ago, and mortgage rates up more than 350 basis points since late November 2021, there are few, if any, deals in sight for buyers looking to finance a home purchase,” Realtor.com economic research analyst Hannah Jones said in a statement. “However, some buyers are finding success by relocating to a more affordable area, or by taking advantage of the negotiation opportunities that high inventory and tapering demand create.”
A more measurable test of the health of the housing market will come after the traditionally slower winter season when it will be seen whether sales will follow traditional seasonal patterns in a high mortgage rate environment.
“The big test will come in late spring/early summer of 2023 as we approach the peak of the annual selling season and much will be predicated on how markets and consumers feel about the economy at that time,” Otero said. “If we indeed get a Fed “pivot” over the next six months, perhaps housing markets stabilize in time to salvage the selling season.”
The unexpected jump could represent a spot of hope for homebuilders, following news that homebuilder sentiment dropped another five points this month to the lowest level seen since Nov. 12 after 11 straight months of declines, and that new housing starts dropped another 4.2 percent in October.