Washington, DC, November 29, 2006--Sales of new-homes fell 3.2% in October to a seasonally adjusted annual rate of 1.004 million, the Commerce Department estimated Wednesday.
New-home sales are now down 25.4% in the past year. Sales are down 17.9% in the first 10 months of 2006 compared with 2005.
The sales pace in July, August and September was revised lower by a total of 64,000.
Economists were expecting a decline to about 1.04 million annualized in October.
Median sales prices were up 2% in the past 12 months to $248,500, reversing a trend toward falling prices year-over-year. Sales of houses priced less than $200,000 decreased by 16%.
The number of new homes on the market dropped 0.7% to 558,000, the third straight decline. The inventory represents a 7-month supply at the current sales pace, up from 6.7 months in September. The inventory peaked at 7.2 months in July.
Home builders have piled on incentives, including offering free vacations and new cars, to sell homes and reduce inventories. Such incentives are not subtracted from the sales price reported to the government.
Sales are reported when a contract is signed, not at the closing of the sale. Home builders have reported a large increase in cancellations in recent months. Cancellations are not reflected in the government data, so the reported sales are likely overstated.
Regionally, sales fell 39% in the Northeast, 5.6% in the Midwest and 1.7% in the South. Sales rose 3.2% in the West.
The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions are common.
The standard error of 11.2% is so high, in fact, that the government cannot be sure sales decreased at all in October. The 3.2% decline is statistically meaningless.
It can take up to six months for a trend in sales to emerge. New-home sales have averaged 1.05 million per month over the past six months, compared with 1.10 million in the six months ending in September. The six-month sales average is now down 19% from December.
In a separate report, the Commerce Department said the U.S. economy grew at a 2.2% annual rate in the third quarter, an upward revision from the 1.6% initially reported.
