New home sales climb 2.7% in September; Outlook not so good
* New home sales rose 2.7% to a seasonally adjusted annual rate of 464,000 from a downwardly revised pace of 452,000 in August (originally reported as 460,000). That was better than the forecast for a reading of 450,000.
* The supply of homes for sale continues to decline due to aggressive cutbacks in home construction. It shrank 7.3% to 394,000 from 425,000 in August. That was good for 10.4 months of supply at the current sales pace, down from 11.4 months a month earlier.
* The median price of a new home dropped 9.1% from a year ago -- to $218,400 from $240,300. That's the second-largest decline in new home prices of this cycle (-12.7% was the biggest YOY drop; it was seen in March).
Housing market conditions improved somewhat in September, with new home sales climbing off their multi-year lows and existing home sales rising as well. We continue to see substantial improvement in the new home inventory situation, too. The supply of homes for sale is declining rapidly due to the combination of aggressive construction cutbacks and a pickup in sales prompted by price reductions and aggressive incentives.
The outlook is a bit cloudier, however. The credit markets ran off the rails in October, and the broader economy is clearly decelerating. If unemployment continues to rise and confidence continues to fall, the late summer buying spree could easily falter. Indications suggest that may be happening already. In October, purchase mortgage applications fell to a seven-year low and a key gauge of home builder sentiment dropped to its lowest on record.