BUSINESS

US new home sales edge up 0.7 per cent in October to fastest pace since May

11/26/2014 10:07 EST | Updated 01/26/2015 05:59 EST
WASHINGTON - Sales of new U.S. homes edged up modestly in October, led by a big jump in activity in the Midwest.

New home sales advanced 0.7 per cent last month to a seasonally adjusted annual rate of 458,000, the Commerce Department reported Wednesday. The result followed a smaller 0.4 per cent gain in September and put sales at the highest point since May.

The strength last month stemmed from a big 15.8 per cent increase in sales in the Midwest and a smaller 7.1 per cent rise in the Northeast. Those increases offset a 1.9 per cent fall in sales in the South, which accounts for half of the new-home market, and a 2.7 per cent drop in the West.

The median price of a home sold in October was $305,000, up 16.5 per cent from a year ago.

Housing has struggled to recover since the recession ended in June 2009. Many potential buyers lack the savings and strong credit history needed to afford a home, causing them to rent or remain in their existing homes instead of upgrading. New home sales remain sharply below the annual rate of 700,000 seen during the 1990s.

A combination of factors has depressed sales. An unusually harsh winter crippled sales at the beginning of the year and even after the snow had melted, tight credit, rising home prices and flat incomes for many Americans have limited the number of buyers who could afford a home.

A separate report Wednesday showed that the number of Americans signing contracts to buy homes fell slightly in October. The National Association of Relators' pending home sales index declined 1.1 per cent to 104.1.

But in an encouraging sign, sales of existing homes rose 1.5 per cent in October to a seasonally adjusted annual rate of 5.26 million, NAR said last week. October marked the first month of 2014 in which sales of previously owned homes were higher than the same month in 2013.