Growth Alert: New Home Sales Hit 10-year High


Sales of new single-family homes surprised economists in October to the upside. Sales rose last month hitting their highest level in 10 years amid robust demand across the country. The Commerce Department said new home sales increased by 6.2 percent to a seasonally adjusted annual rate of 685,000 units. That was the highest level since October 2007 and followed September’s strong 645,000 units. It was the third straight month of rising new home sales growth showing the strength underpinning the US economy.

The housing market has been strong for much of this year, amid shortages of homes available for sale, skilled labor and suitable land for building. Furthermore, even though the new home sales are at 10 year highs, they are no where near the bubble highs where new home sales were close to 1.4 million in July 2005. This isn’t a repeat of the last cycle as we don’t see the craziness of subprime and house flipping that was the norm. Banks have been much more cautious in their lending and that should be viewed as positive. As long as long term interest rates stay low, real estate prices should continue to march higher.

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