New home sales are suddenly on fire and far surpassing the highest estimate for a second month in row, up 6.2 percent in October to a 685,000 annualized rate and a new expansion high. The downward revision to September is limited, holding at an unusual gain of 14.2 percent to a 645,000 rate which is now the second highest this cycle.
Supply on the market rose 4,000 to 282,000 but relative to sales, supply fell to 4.9 months from 5.2 percent. And in a measure of how much sales have jumped, supply back in August was 5.9 months. Some of October's sales gain may be explained by discounting as the median price fell 3.7 percent to $312,800 for a year-on-year gain of only 3.3 percent.
The Northeast is the standout sales region for the second month, up 30 percent to what, however, remains the smallest rate at 56,000. Year-on-year sales in the Northeast are up 65 percent. The Midwest has also come alive the last two months, up 18 percent in October for a yearly gain of 16.2 percent. The biggest contributor in size to the month's sales is the West, up 6.4 percent to 167,000 for a yearly 14.0 percent gain. The South, which did not show any effect from the heavy hurricane season, rose 1.3 percent in October for a year-on-year increase of 14.0 percent.
Total year-on-year sales are up 18.7 percent for a nearly 2 percentage point gain from September. But not the entire housing sector is showing this kind of strength as sales of existing homes are actually down 0.9 percent on the year. But new homes, boosted by the strong labor and stock markets, are definitely moving and look to be a significant contributor to fourth-quarter growth.
The new home sales report is known for its volatility which was apparent once again in September as the annualized rate surged to 667,000 for an 18.9 percent monthly gain. This was the largest percentage gain in 28 years and the highest level in 10 years. A big step back in October wouldn't be a surprise and, given the strength of September, wouldn't necessarily dim what is an increasingly positive outlook for the housing sector. The consensus for October new home sales is a 620 ,000 annualized rate.