New single-family home sales rose in October while the supply of homes on the market fell to its lowest level since April 2010.
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The Commerce Department reported on Monday that sales climbed 1.3% to a seasonally adjusted 307,000-unit annual rate in October, the fastest pace in five months, though still below analysts’ expectations.
At the current pace of sales, the supply of new homes in the market would last 6.3 months. Today’s report also revises September’s sales pace from 313,000 units down to 303,000 units.
Falling home prices and tighter credit have been the bane of the economic recovery in the United States. While today’s news gives hope that market is stabilizing, it shows the median sales price dropping 0.5% last month to $212,300, the lowest in a year.
Falling home prices could hamper the recovery, as they make homes seem like a bad investment to potential buyers. Still, the median price is up 4.0% compared to October 2011.
The glut of unsold properties has also been responsible for the slow housing market recovery, so news that fewer properties are on the market means supply may be coming back in line with demand. But without a steady supply of credit and at least stable prices, a turnaround could still be some time away.
For that reason, the government last month expanded its refinancing program to help homeowners who owe more than their homes are worth. The Federal Reserve has also held short-term interest rates at nearly zero since 2008 while expanding its balance sheet in a bid to get credit to businesses and households, helping bring 30-year mortgage rates to record lows. However, many would-be borrowers still cannot get a loan.