U.S. housing market shrugs off weak economic growth

WASHINGTON -- More Americans bought new homes in September, a sign that demand remains strong despite a shortage of properties on the market.

Recent hiring gains couples with low interest rates have bolstered the market for new homes. But builders have largely struggled to keep pace with new construction, creating a shortage of listings for would-be buyers.

New-home sales advanced 3.1 percent last month to a seasonally adjusted annual rate of 593,000, the Commerce Department said Wednesday, up from 575,000 sales in August and nearly 30 percent more than the estimated 457,000 sales last September. The gains were concentrated in the Northeast, Midwest and South, as sales tumbled last month in the West.

Jennifer Lee, director of economic research at BMO Capital Markets, explained the factors that led to the boost, including a tightened supply.

“The number of homes available to be bought slipped 0.4 percent in the month,” she said in a client note. “It also took a little less time to sell these homes, from after building is completed to the actual sale itself (3.1 months). Finally, the number of homes sold exceeded those constructed.”

So far this year, sales have increased 13 percent compared to the same period in 2015. But the growth isn’t necessarily here to stay. 

“The trend is rising, but likely not for much longer,” Ian Shepherdson, chief economist of Pantheon Macroeconomics, told CBS News. 

Sales have steadily grown from the depths of the housing bust and Great Recession over the past three years. The housing market has been a relative bright spot this year, with the real estate sector continuing to rebound even amid lackluster economic growth.

Still, new-home sales still lag their historic pace of roughly 650,000 a year. If the sales pace for 2016 holds, sales will total roughly 566,000 at the end of this year.

The greater demand has caused narrower inventories of newly built homes. The market contains only 4.8 months’ supply of new homes, down from 5.8 months a year ago.

The declining supply of new homes has modestly boosted prices, which have risen 2.7 percent to an average of $377,700.

Additional construction is unlikely to end the supply crunch. In September, housing starts fell 9 percent to a seasonally adjusted annual rate of 1.15 million.

Yet builders remain confident about their prospects. The National Association of Home Builders/Wells Fargo builder sentiment index released last week was 63 in October, down slightly from the prior month. Readings above 50 indicate more builders view sales conditions as good rather than poor.

Low mortgage rates are feeding much of this confidence. Mortgage buyer Freddie Mac said the average 30-year fixed-rate mortgage was 3.52 percent last week, down from a 52-week high of 4.01 percent.