New Home Sales : Units Moved Jump 25% In October, Aided By Low Mortgage Rates
Sales of newly-built homes surged in October, racing to near a 5-year high.
Sales climbed at all price points $300,000 or lower, with the majority of homes sold in the "first-time buyer" range between one-hundred-fifty and three-hundred thousand dollars.
For buyers of new construction, prices are expected to rise through 2013 and into 2014.
Just 183,000 New Homes For Sale
According to the U.S. Census Bureau, 444,000 new homes were sold in October 2013 on a seasonally-adjusted, annualized basis. A "new home" is a home which has not been previously occupied; which can be considered new construction.
The October tally is a 25% increase from the month prior and the largest New Home Sales reading in six months. However, the results may be affected by a large margin of error.
One of the reasons why the October New Home Sales report jumped 25 percent is that readings from prior months were revised downward. There was a net negative revision of sixty-three thousand homes among the June, July, and August releases.
The revisions were made after this year's 16-day government shutdown, which shut down Census Bureau reporting for New Home Sales and other economic data ad well. The shutdown prevented the release of September's data, which was revealed to be 354,000.
The Census Bureau bureau assigned a ±19% Margin of Error to the October data. Gains may been as large as 44% or as small as 6%. We won't know until November and December's New Home Sales data is compiled.
As compared to October last year, sales of new homes are up twenty-two percent.
"Bull Market" New Home Supply : 4.9 Months
Last decade, many U.S. homebuilders found themselves overbuilt when the housing market turned worse. This decade, they've taken care to avoid such an outcome.
At the end of October 2013, the national new home supply was mostly unchanged at 183,000 homes, but the time required to "sell out" those homes dropped by 1.5 months. There were far more buyers in October's market as compared to the 30 days prior.
The Census Bureau reports New Home Supply at 4.9 months.
For buyers of new construction, this figure is significant. Housing analysts consider a new home supply of less than 6.0 months to favor home builders. With an imbalance between buyers and sellers, home prices often rise; and builders grant fewer concessions.
Despite reduced leverage, though, buyers are still getting "good deals". Low mortgage rates and low- and no-downpayment mortgage programs have helped to keep home affordable.
Common low-and no-downpayment mortgage options include :
- The FHA's standard 3.5% downpayment program for buyers
- The VA mortgage and USDA program which offer 100% financing to qualified buyers
- Fannie Mae's 95% loan-to-value program
Furthermore, many of these programs support extended, high-balance loan sizes. In "high cost" areas such as Loudoun County, Virginia; Los Angeles County, California; and Eagle County, Colorado, as examples, low-downpayment loans are available for up to $729,750.
11% of new homes sold last month sold for more than $500,000.
Mortgage Rates For New Construction
Home prices are rising and home supplies are down. However, the future is expected to be even brighter. Today's home buyers may find better new construction "deals" than tomorrow's.
Know your options as buyer. Get today's mortgage rate and see how much you can afford. Consider a pre-approval, too -- it can help with strengthen your offer.