U.S. new home sales rise surprisingly in October, growth likely to moderate in months ahead

New home sales in the U.S. have surprised on the upside for the second consecutive month in October. Sales rose 6.2 percent sequentially to 685,000, coming in above consensus expectations of a drop of 6.2 percent to 626k. The October rise has brought the sales to the highest level since 2007. There were slight downward revisions to September data, with the monthly pace of rise coming down to 14.2 percent from 18.9 percent; however, this does not alter the scenario for the last two months, when sales were quite robust.

Region wise, the increase in sales was widespread. Sales rose 13k in the Northeast, up 12k in the Midwest, 10k in the West and 5k in the South. A certain amount of softness was expected in new home sales, particularly in the South after the hurricane season. On the contrary, new home sales are implying a stronger rate of growth than the moderate housing recovery that has been in place for some time, noted Barclays in a research report. Housing activity is not expected to pick up momentum considerably and in a sustained way at this stage in the business cycle, while new home sales growth is expected to moderate in months ahead, stated Barclays.

The stronger than anticipated sales figures suggest higher brokers’ commissions and single-family construction than was penciled in earlier.

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