Sales of new single family homes spiked 25.4 percent in October despite rising mortgage rates and a weak September sales rate, indicating the market recovery remains stable, according to data released Wednesday by the Department of Commerce.
At this sales rate it would take approximately 4.9 months to sell all the homes on the market, according to the report, which was delayed because of the government shutdown. The median sales price of new houses sold in October was $245,800 and the average sales price was $321,700.
This surge in home sales, which is measured by the amount of contracts signed, was the highest monthly increase in approximately 33 years, according to Reuters analysts. A six month supply of housing sales is considered a healthy balance of supply and demand for homes, Reuters added.
Good signs for the recovery of the housing market also include the rise in planned construction of homes. Building permits increased 6.2 percent in October to an annual rate of approximately 103 million, which is the most applications for housing construction filed since the financial crisis began in 2008, according to Commerce Department data released in November.
September's home sales were the weakest since March 2012, in part because supply of affordable-priced homes was tighter at the end of summer, and because consumers were discouraged from making large purchases as Congress spiraled towards a government shutdown, said Patrick Newport, an economist at IHS Global Insight.
"By the time the government shutdown ended in mid-October, builders had managed to amass some inventory, and mortgage rates had ebbed," Newport said. "The surge in inventory allowed the median home price to slide to its lowest level in eleven months, enabling buyers to go ahead with their home purchase in October."