New-home sales surge in October

New homes are selling — fast

Home buyers are flocking to new construction in droves.

New-home sales hit the highest level in a decade in October at a seasonally adjusted annual rate of 685,000 units, according to a joint release from the U.S. Census Bureau and the Department of Housing and Urban Development.

That’s 6.2 percent higher than September’s revised rate of 645,000 units and 18.7 percent higher than October 2016’s sales of 577,000.

Much of the new-home sales growth is in the Midwest and Northeast while the West and South saw smaller gains.

Low supply, hot jobs market driving sales growth

What’s driving the positive growth? Tight existing-home inventory, more household formations and a healthy jobs market, says Robert Dietz, chief economist with the National Association of Home Builders.

“Despite some volatility in the month-to-month sales figures, October marks the sixth month in 2017 at an annual sales pace of more than 600,000,” Dietz says. “New-home sales through October are running 8.9 percent higher than this time in 2016, in line with NAHB’s forecast.”

New homes tend to be more expensive than resales, but the median new-home sales price fell to $312,800 in October. The average sales price, however, spiked 13.6 percent over the past 12 months to $400,200.

Overall, buyers still have low 30-year mortgage rates in their favor, hovering at or below 4 percent.

But that’s not necessarily enough to offset high home prices and slow income growth. And, of course, the persistent shortage of homes on the market compounds the affordability problem.

The supply level of new homes in October was just 4.9 months, the lowest level since July 2016, the government reported. Given a tight existing inventory, more new homes need to be built to keep up with housing demand, Dietz says.

What are today’s mortgage rates?

Buying new construction can add up depending on what design options you choose and lot location. You’ll want to have your financing in order and shop lenders.

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