U.S. new-home sales increase as prices climb to record high

A home stands under construction in Oakland, Calif., on June 23, 2020.
A home stands under construction in Oakland, Calif., on June 23, 2020.Bloomberg photo by David Paul Morris.

Sales of new U.S. homes edged up in October, reflecting stabilizing demand even as builders face supply-chain disruptions and buyers grapple with rising prices.

Purchases of new single-family homes increased 0.4% to a 745,000 annualized pace following a downwardly revised 742,000 in September, government data showed Wednesday. The median estimate in a Bloomberg survey of economists called for a 800,000 rate.

The report, produced by the U.S. Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home jumped 18% from a year earlier to a record $407,700.

Sentiment among U.S. builders has held up as a lack of options in the resale market, combined with low mortgage rates and a desire for more spacious properties among Americans working remotely, fuels new-home demand. Still, transportation bottlenecks, elevated materials costs, and worker shortages have disrupted the pace of residential construction, delaying completions and pushing prices out of reach for many prospective buyers.

There were 389,000 new homes for sale as of the end of October, the most in 13 years -- though 28% of those houses were not yet started. At the current sales pace, it would take 6.3 months to exhaust the supply of new homes, compared with 3.6 months at the start of the year.

The number of homes sold in October and awaiting the start of construction -- a measure of backlogs - rose from a month earlier to 271,000, Wednesday's report showed. The total number of homes sold with construction underway eased to 291,000, the lowest since June 2020.

Separate data out earlier this week showed purchases of previously owned homes, which account for the majority of the market, jumped last month to the highest level since the start of the year on strong underlying demand.

New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close.

The new-homes data are volatile; the report showed 90% confidence that the change in sales ranged from a 20.7% decline to a 21.5% increase.