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New Homes Sales Hit 30-Month High in September

New home sales jumped 5.7 percent in September to a seasonally adjusted average annualized rate of 389,000, the highest rate since April 2010, the ""Census Bureau and Department of Housing and Urban Development"":http://www.census.gov/construction/nrs/pdf/newressales_201209.pdf reported Wednesday. Economists surveyed by Bloomberg expected the report to show a sales pace of 385,000. Sales for August were revised down to 368,000 from the originally reported 373,000.

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Sales were still up 27.1 percent from September 2011, the strongest year-over-year gain since February.

The month-to-month sales improvement was the strongest since February, when sales improved 27,000, or 8.0 percent.

While sales numbers improved, both the median and average sales price of a new home dropped month-to-month.

The month-month dip in prices was the first since February. Almost 65 percent of the homes sold in September were priced below $300,000, up from 62 percent in August.

Despite the slight month-to-month decline, the median price of a new home is up 11.7 percent from a year ago and the average price is up 14.5 percent, each showing a [COLUMN_BREAK] double-digit year-over-year percentage gain for the second straight month. The percentage increase in the average price was the strongest since January 2010.

The home sales report├â┬ó├óÔÇÜ┬¼├óÔé¼┬Øbased on contracts, not closings├â┬ó├óÔÇÜ┬¼├óÔé¼┬Øsupported the sharp increase in the ""buyer traffic index"":https://themreport.com/articles/stronger-traffic-boosts-builder-confidence-2012-10-16 reported by the National Association of Home Builders in its most recent Housing Market Index. Though that report was labeled for October, it was based on a survey of home builders early in the month and reflected activity in the previous month.

New home sales were boosted in April 2010 by the second federal home buyer tax credit program. Excluding those programs, the September new home sales pace was the fastest since November 2008.

The inventory of new homes for sale at the end of the month was 145,000, ups slightly from 143,000 in August. With the faster sales rate, the months├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ó supply of new homes dipped to 4.5 months, the lowest since October 2005. The shrinking supply should put upward pressure on prices, perhaps enough to lead to a surge in building.

Indeed, housing starts and permits ""jumped in September"":https://themreport.com/articles/september-housing-permits-starts-at-4-year-highs-2012-10-17 to their highest levels since July 2008, the Census Bureau and HUD reported last week. Housing starts jumped 15.0 percent, while permits improved 11.6 percent.

The increase in sales was fueled by a surge in the South, where sales improved to 215,000 from August├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós 184,000. Sales increased as well in the Northeast (5,000) and the West (2,000) while dropping 19,000 in the Midwest.

Even with the September increase, the new home sales pace is still 72.0 percent of its July 2005 peak of 1.39 million.

Sales also failed to keep pace with single family completions. According to a separate Census/HUD report, builders completed 524,000 new single family homes in September.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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