New Home Sales Tread Water in October

New home sales fell marginally to 368,000 in October from September, after being revised down sharply for September. The decline was concentrated in the South and Northeast; both were affected by Superstorm Sandy at the end of the month. More storm disruptions are expected to show up in the data for November.

Separately, new home prices firmed a bit, reflecting tight supplies and the mix of wealthier, second-time buyers in the market. That is good news for builders who make more money on higher-end homes with a lot of upgrades. First-time buyers are not showing up in the ranks one would normally expect, given affordability and the recent improvement in consumer confidence. This is in response to persistently tight mortgage market conditions and hurdles to getting additional credit created by the mounting overhang of student debt.

Finally, mortgage applications for purchase continued to move up in the recent week, though refinancing still accounts for 81% of all mortgage applications. This suggests the market will show renewed gains once we get further away from the disruptions created by Sandy.

Bottom Line: The housing market is on the mend, albeit from low levels. This is going to be one of the biggest accelerants for growth in 2013.

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