New Home Sales Soar
Sales of new homes soared at a record pace in October in what could be a last hurrah for the booming housing market.
The Commerce Department said that sales of new single-family homes shot up by 13 percent last month, the biggest one-month gain in more than 12 years. The increase pushed sales to an all-time high seasonally adjusted annual rate of 1.42 million units.
The increase confounded analysts who had been predicting that new home sales would decline by 1.8 percent, reflecting continued increases in mortgage rates. It was possible that the unexpected surge reflected a final rush by buyers to get into the market before mortgage rates climb higher.
The rise in new home sales was accompanied by an increase in prices, with the median price increasing by 1.6 percent from September to $231,300 in October.
Sales were up in most regions of the country, led by a 46.9 percent surge in the West and a 43.3 percent jump in the Northeast. Sales also rose by 1.9 percent in the South but were down 9.5 percent in the Midwest.
The nationwide jump in new home sales was the one bright spot for housing last month. Sales of previously owned homes fell by 2.7 percent, the National Association of Realtors reported on Monday, and construction of new homes and apartments also fell during the month.
Analysts believe the nation's booming housing market is beginning to show signs of slowing under the impact of rising mortgage rates, which are going up as the Federal Reserve continues a campaign to boost interest rates to make sure inflation does not get out of control.
David Lereah, the Realtors' chief economist, said he was looking for sales of existing homes to drop next year and for prices, which had been rising at double-digit rates, to moderate to a gain of around 5 percent. The concern of some economists is that the booming housing market could have a bigger downturn, with sales and prices plummeting in the nation's hottest markets.
The Commerce Department also reported Tuesday that orders to U.S. factories for big-ticket manufactured goods rebounded sharply in October as demand for military aircraft shot up by the largest amount in more than five years.
Orders for durable goods rose by 3.4 percent last month, erasing a 2 percent decline in September that was blamed on disruptions from hurricanes Katrina and Rita and a machinists strike at aircraft giant Boeing.
The increase was better than the 1.4 percent advance that economists had been expecting and provided further evidence that the economy is shaking off the adverse effects of the Gulf Coast hurricanes.
For October, durable goods orders rose by $7.1 billion to a seasonally adjusted $214.4 billion. More than half of that increase reflected a $4.1 billion jump in orders for military aircraft and parts, which surged by 140.4 percent to $7 billion.
That was the biggest increase since June of 2000 and reflected the billions of dollars being spent by the federal government in a defense build-up to fight wars in Iraq and Afghanistan.
Orders for commercial aircraft also increased in October, advancing by 50.4 percent to $11 billion after having fallen by 2.7 percent the previous month. The September decline was blamed in part on a strike by machinists at Boeing which disrupted activities at the nation's largest airplane manufacturer.
Orders for all transportation items were up 11.4 percent, a gain that reflected strength in both commercial and military aircraft sales. Orders for motor vehicles actually fell by 2.2 percent in October, reflecting the trouble automakers had spurring sales following the impact of a sharp surge in gasoline prices in September.
Excluding transportation, durable goods orders would have been up a more modest 0.3 percent following a 0.2 percent decline in September. Total durable goods orders had fallen 2 percent in September.
Orders for non-defense capital goods, considered a good barometer of business plans for expansion and modernization, rose by 6.7 percent last month after having fallen by 8.6 percent in September.