New-home sales fall; earlier sales revised downward

WASHINGTON - U.S. sales of new homes fell slightly in October, and September sales were slower than initially thought. The October sales pace was dragged lower by steep declines on the East Coast, partly related to Superstorm Sandy.

The Commerce Department said Wednesday that new-home sales dipped 0.3 percent in October to a seasonally adjusted annual rate of 368,000. That's down marginally from the 369,000 pace in September, which was revised lower from an initially reported 389,000.

Sales fell a sharp 32.3 percent in the Northeast and nearly 12 percent in the South. The government said Sandy had a minimal effect on the housing data because it made landfall in the final days of the month. Still, the storm disrupted business activity from North Carolina to Maine.

States outside the area affected by the storm fared better. Sales surged 62.2 percent in the Midwest and were up 8.8 percent in the West.

"Sales probably would have been slightly stronger without the hurricane," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics. "Still, the report was disappointing."

Sales were still 17 percent higher in October than the same month in 2011. Even with the gain, new-home sales are well below the annual rate of 700,000 that economists consider healthy.

Locally, Las Vegas-based Home Builders Research reported 593 recorded new-home sales in October, a 61 percent increase from 367 sales a year ago. For the year, new-home sales are up 36 percent to 4,303 through October.

"Over the past 18 months, new home sales have been on the gentle rising trend although they remain at a very depressed level," said Steven Wood, chief economist at Insight Economics.

The modest improvement in the new-home market follows other reports that show the housing market starting to recover more than five years after the bubble burst. Home prices are rising, sales are up, and builders are starting work on more new homes and apartments.

Nationally, the median price of a new home sold in October was $237,700. That's down 4.2 percent from September but 5.7 percent higher than October 2011. In Las Vegas, the median price is $216,614, up 10.3 percent from a year ago.

"The new-home closing prices are finally exhibiting the effects of the lack of inventory," Las Vegas housing analyst Dennis Smith said. "As we've reported during the past few months, the prices in sales offices have risen 10 percent to 30 percent in some specific submarket locations."

The supply of homes for sale nationally inched up to 147,000, slightly above the lowest level on records dating back to 1967.

The thin supply of homes for sale has helped drive this year's housing rebound. The market has finally started to shed the excess number of homes built during the housing boom.

At the same time, more people are looking to buy or rent after living with relatives or friends during and after the Great Recession. And mortgage rates have been near record lows all year, making homes more affordable.

Though new homes represent only a small portion of the housing market, they have a disproportionate impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to statistics from the National Association of Home Builders.

"The challenge for us is going to be competition for labor," said Tony Musso, president of Distinctive Homes in Las Vegas. "So many people left the city when real estate crashed and now the labor pool is stretched."

Sales of previously occupied homes are near five-year highs, excluding temporary spikes in 2009 and 2010 when a home-buyer tax credit boosted purchases. Builders, meanwhile, are increasingly confident that the recovery has legs. A measure of their confidence rose to the highest level in six and a half years this month. And builders broke ground on new homes and apartments last month at the fastest pace in more than four years.

The Standard & Poor's/Case-Shiller home price index, released Tuesday, found that prices rose in most major cities in September compared to August. They rose 3.6 percent in the third quarter compared to the same period last year. Las Vegas prices rose 3.8 percent.

There are still factors dragging on a housing recovery. Many Americans, particularly first-time home buyers, are unable to qualify for a mortgage or can't afford larger down payments.

Review-Journal writer Hubble Smith contributed to this report.