New Home Sales Rise in September, but August Pace Cut

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New Home Sales
Keith Srakocic/AP
By Lucia Mutikani

WASHINGTON -- Sales of new U.S. single-family homes rose to a six-year high in September, but a sharp downward revision to August's sales pace indicated that the housing recovery remains fragile.

The Commerce Department said Friday that sales increased 0.2 percent to a seasonally adjusted annual rate of 467,000 units, the highest reading since July 2008. August's sales pace was revised down to 466,000 units from 504,000 units.

Economists polled by Reuters had forecast new home sales at a 470,000-unit pace last month.

New home sales, which account for about 8 percent of the housing market, tend to be volatile month to month and large revisions aren't unusual. Compared to September last year, sales were up 17 percent.

Housing is slowly regaining its footing after activity stalled in the second half of 2013 as mortgage rates soared. With the 30-year fixed mortgage rate this week falling to its lowest level since June of last year, sales could pick up.

Slow wage growth, however, remains a constraint. Data this week showed sales of previously owned homes touched a one-year high in September.

Last month, new home sales fell 8.9 percent in the West, handing back some of August's 28.1 percent surge. In the populous South, sales rose 2 percent, while they increased 12.3 percent in the Midwest. Sales were flat in the Northeast.

With sales rising modestly, the stock of new houses available on the market rose 1.5 percent to the highest level since July 2010.

At September's sales pace it would take 5.3 months to clear the supply of houses on the market, unchanged from August. Six months' supply is normally considered a healthy balance between supply and demand.

The median new home price fell 4 percent to $259,000 from a year ago.

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New Home Sales Rise in September, but August Pace Cut
In 2013, the median lot size of a new sold single-family house was 8,596 square feet, or just under 0.2 acres. While that might not seem like a lot for you suburban homeowners, a regional breakdown shows that the small average size isn't due to urban inhabitants alone. The Northeast enjoys the largest average lot, at 13,052 square feet, while the less densely populated South and West lay claim to just 8,649 square feet and 6,796 square feet, respectively.
From a footprint of 1,650 square feet in 1978, the average American home has grown 50 percent, to 2,478 square feet. Yet tough times seem to be squeezing our expansionary attitude. Although new single-family homes sold in 2013 clocked in at a median 2,478 square feet, single-family homes completed in 2013 amounted to just 2,384 square feet. Homebuilder confidence has plummeted into pessimism in the last few months, hinting that the housing market's road to recovery might be rougher than expected.

While birth rates have held relatively steady for the past 40 years, everyone apparently needs more elbow room. The share of homes with four or more bedrooms has jumped from 27 percent in 1978 to 51 percent in 2013. And where would a bedroom be without a bathroom? While just 8 percent of 1978 homes had three or more baths, 37 percent of homes now fall in that category.

From 2008 to 2013, both the share of homes with four or more bedrooms and the share of homes with three or more bathrooms have jumped 10 percentage points, while median square footage is up 10.9 percent for the same period.
 

If there's one strong sign of new housing demand, it's home prices. After nose-diving during the Great Recession to a median sales price of just $216,700, home prices have been roaring back up. In 2013, the median sales price for a new single-family home was $268,900. But for those on the housing hunt, don't be discouraged. Home prices today still don't hold a candle to costs in 2006, according to the well-regarded Case-Shiller Home Price Index. In 2006, the index topped 200 before plummeting to less than 140, and current rates put the index just above 170.
It is America, after all. Our industrialized nation was built on the back of Henry Ford, and America is in no danger of breaking its automobile addiction. In 2013, a whopping 300,000 of the 429,000 new single-family homes sold included a two-car garage. And 98,000 new homes included a three-car garage -- the highest amount since 2007. Of all new homes built, only 10,000 failed to include a garage or carport.
American homebuyers are building bigger homes than ever before. But if there's one thing the recent recession has shown us, bigger isn't always better. Although 30 percent of Americans believe real estate is the best long-term investment, homeownership isn't for everyone. There are plenty of reasons to spend less or invest elsewhere -- and leave keeping up with the Joneses to Mr. and Mrs. Smith.
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