Fewer New-Home Sales as Prices Rise
By JEFF BATER
November 29, 2006
WASHINGTON -- New-home sales resumed declining in October, but the median price increased.
Meanwhile, the U.S. economy was stronger last summer than first thought because businesses accumulated more inventory and trade was less of a drag. Gauges measuring third-quarter inflation were lowered slightly, according to Wednesday's data revisions.
Sales of single-family homes decreased by 3.2% to a seasonally adjusted annual rate of 1.004 million, the Commerce Department said Wednesday. September sales climbed 3.7% to 1.037 million, revised from a previously estimated 5.3% advance to 1.075 million. Sales increased 2.1% in August but fell 9.2% in July.
The average price of a new home increased to $309,700 in October, up from $297,700 in September and $293,600 in October 2005, according to Commerce. The median price also rose, up to $248,500 last month from $218,200 in September and $243,900 in October 2005.
The sales numbers Wednesday were worse than what Wall Street expected. The median estimate of 23 economists surveyed by Dow Jones Newswires was a 2.3% decrease to an annual rate of 1.050 million in October.
Year-to-year, sales were down 25.4% since October 2005 as the housing market softens. Yet, in a glimmer of hope, the National Association of Realtors reported Tuesday sales of previously owned homes rose in October for the first time in eight months; still, year over year, sales were 11.5% lower.
New-home inventories receded in October. There were an estimated 558,000 homes for sale at the end of the month, the Commerce data Wednesday showed. That represented a 7.0 months' supply at the current sales rate. An estimated 562,000 homes were for sale at the end of September, a 6.7 months' inventory.
Financing costs drifted down in October. The average rate on a 30-year mortgage was 6.36%. It was 6.40% a month earlier -- yet 6.07% in October 2005.
By region, new-home sales last month fell 1.7% in the South, 5.6% in the Midwest and 39.0% in the Northeast. Demand was 3.2% higher in the West. Based on figures unadjusted for seasonal factors, an estimated 77,000 homes were actually sold last month in the U.S., down from 82,000 in September.
GDP Revised Up
Gross domestic product increased at a 2.2% annual rate July through September, the Commerce Department said Wednesday in its first revision to third-quarter 2006 GDP. The government initially estimated growth at 1.6%.
GDP has weakened as the housing slump weights down the economy. Second-quarter growth was 2.6% and GDP raced ahead at a 5.6% pace in the first three months of 2006.
The government's price index for personal consumption increased 2.4%, lower than the previously estimated 2.5% climb but below the second quarter's 4.0% rise. The PCE price gauge excluding food and energy increased 2.2%, lower than the previously estimated 2.3% climb and below the second quarter's 2.7% rise.
Corporate profits after taxes climbed 4.6% to $1.167 trillion in July through September from the second quarter, the report showed. In the second quarter, profits increased 0.3%. Year-to-year, profits surged 31.5% since the third quarter of 2005.
Revisions to inventories and imports were behind the adjustment to GDP, which is a measure of all goods and services produced in the economy. Wall Street expected a smaller upward revision to third-quarter GDP; the median estimate of 22 economists surveyed by Dow Jones Newswires was a 1.8% increase.
The revisions released Wednesday showed businesses increased inventories by $58.0 billion; originally, Commerce estimated a $50.7 billion increase. Companies had lifted stocks $53.7 billion in the second quarter.
The accumulation of goods added 0.16 percentage point to third-quarter GDP. Originally, Commerce said inventories subtracted 0.10 percentage point from GDP. Real final sales of domestic product, which is GDP less the change in private inventories, climbed 2.1%. The original estimate was a 1.7% increase. Second-quarter sales also rose 2.1%.
International trade was less of a restraint on GDP because imports didn't climb as much as first thought, according to the revised data. U.S. exports rose by 6.3%. Imports increased 5.3%. Originally, exports were seen up 6.5% and imports 7.8% higher. So, trade reduced GDP by 0.21 percentage points; initially, Commerce said trade cut third-quarter GDP by 0.58 percentage points. In the second quarter, exports had gone up by 6.2% and imports climbed 1.4%.
Residential fixed investment, which includes spending on housing, plunged by 18.0% in the third quarter, a bigger drop than the originally estimated 17.4%. Second-quarter spending tumbled 11.1%. The 18.0% drop translated to a cut of 1.16 percentage points in third-quarter GDP, and it marked the sharpest fall since 21.7% in the first quarter of 1991.
Businesses increased third-quarter spending more than previously thought. Outlays rose 10.0% July through September, higher than the originally estimated 8.6% advance. Business spending rose 4.4% in the second quarter. Third-quarter investment in structures surged 16.7%. Equipment and software increased 7.2%.
Third-quarter spending by consumers increased 2.9%, down from a previously reported 3.1% but above the second quarter's 2.6% advance.
Consumer spending accounts for the lion's share of economic activity -- about two-thirds. It contributed 1.99 percentage points to GDP in the third quarter; the original estimate was a contribution of 2.13 percentage points.
Purchases of durable goods rose 6.0% in July through September, below the previously reported 8.4% increase. Durables dipped 0.1% in the second quarter. Durable goods are expensive items designed to last at least three years, such as cars. Third-quarter non-durables spending increased by 1.1%. Services spending went 3.1% higher.
Federal government spending increased by 1.5%, revised down from an initially estimated 1.7% increase. Second-quarter spending fell 4.5%. State and local government outlays increased 2.6%.
The price index for gross domestic purchases, which measures prices paid by U.S. residents, rose 2.1%, up from a previously estimated 2.0% climb but below the second quarter's 4.0% rise.
The chain-weighted GDP price index rose 1.8%, unchanged from the first estimate but below the second quarter's 3.3% rise.
By JEFF BATER
November 29, 2006
WASHINGTON -- New-home sales resumed declining in October, but the median price increased.
Meanwhile, the U.S. economy was stronger last summer than first thought because businesses accumulated more inventory and trade was less of a drag. Gauges measuring third-quarter inflation were lowered slightly, according to Wednesday's data revisions.
Sales of single-family homes decreased by 3.2% to a seasonally adjusted annual rate of 1.004 million, the Commerce Department said Wednesday. September sales climbed 3.7% to 1.037 million, revised from a previously estimated 5.3% advance to 1.075 million. Sales increased 2.1% in August but fell 9.2% in July.
The average price of a new home increased to $309,700 in October, up from $297,700 in September and $293,600 in October 2005, according to Commerce. The median price also rose, up to $248,500 last month from $218,200 in September and $243,900 in October 2005.
The sales numbers Wednesday were worse than what Wall Street expected. The median estimate of 23 economists surveyed by Dow Jones Newswires was a 2.3% decrease to an annual rate of 1.050 million in October.
Year-to-year, sales were down 25.4% since October 2005 as the housing market softens. Yet, in a glimmer of hope, the National Association of Realtors reported Tuesday sales of previously owned homes rose in October for the first time in eight months; still, year over year, sales were 11.5% lower.
New-home inventories receded in October. There were an estimated 558,000 homes for sale at the end of the month, the Commerce data Wednesday showed. That represented a 7.0 months' supply at the current sales rate. An estimated 562,000 homes were for sale at the end of September, a 6.7 months' inventory.
Financing costs drifted down in October. The average rate on a 30-year mortgage was 6.36%. It was 6.40% a month earlier -- yet 6.07% in October 2005.
By region, new-home sales last month fell 1.7% in the South, 5.6% in the Midwest and 39.0% in the Northeast. Demand was 3.2% higher in the West. Based on figures unadjusted for seasonal factors, an estimated 77,000 homes were actually sold last month in the U.S., down from 82,000 in September.
GDP Revised Up
Gross domestic product increased at a 2.2% annual rate July through September, the Commerce Department said Wednesday in its first revision to third-quarter 2006 GDP. The government initially estimated growth at 1.6%.
GDP has weakened as the housing slump weights down the economy. Second-quarter growth was 2.6% and GDP raced ahead at a 5.6% pace in the first three months of 2006.
The government's price index for personal consumption increased 2.4%, lower than the previously estimated 2.5% climb but below the second quarter's 4.0% rise. The PCE price gauge excluding food and energy increased 2.2%, lower than the previously estimated 2.3% climb and below the second quarter's 2.7% rise.
Corporate profits after taxes climbed 4.6% to $1.167 trillion in July through September from the second quarter, the report showed. In the second quarter, profits increased 0.3%. Year-to-year, profits surged 31.5% since the third quarter of 2005.
Revisions to inventories and imports were behind the adjustment to GDP, which is a measure of all goods and services produced in the economy. Wall Street expected a smaller upward revision to third-quarter GDP; the median estimate of 22 economists surveyed by Dow Jones Newswires was a 1.8% increase.
The revisions released Wednesday showed businesses increased inventories by $58.0 billion; originally, Commerce estimated a $50.7 billion increase. Companies had lifted stocks $53.7 billion in the second quarter.
The accumulation of goods added 0.16 percentage point to third-quarter GDP. Originally, Commerce said inventories subtracted 0.10 percentage point from GDP. Real final sales of domestic product, which is GDP less the change in private inventories, climbed 2.1%. The original estimate was a 1.7% increase. Second-quarter sales also rose 2.1%.
International trade was less of a restraint on GDP because imports didn't climb as much as first thought, according to the revised data. U.S. exports rose by 6.3%. Imports increased 5.3%. Originally, exports were seen up 6.5% and imports 7.8% higher. So, trade reduced GDP by 0.21 percentage points; initially, Commerce said trade cut third-quarter GDP by 0.58 percentage points. In the second quarter, exports had gone up by 6.2% and imports climbed 1.4%.
Residential fixed investment, which includes spending on housing, plunged by 18.0% in the third quarter, a bigger drop than the originally estimated 17.4%. Second-quarter spending tumbled 11.1%. The 18.0% drop translated to a cut of 1.16 percentage points in third-quarter GDP, and it marked the sharpest fall since 21.7% in the first quarter of 1991.
Businesses increased third-quarter spending more than previously thought. Outlays rose 10.0% July through September, higher than the originally estimated 8.6% advance. Business spending rose 4.4% in the second quarter. Third-quarter investment in structures surged 16.7%. Equipment and software increased 7.2%.
Third-quarter spending by consumers increased 2.9%, down from a previously reported 3.1% but above the second quarter's 2.6% advance.
Consumer spending accounts for the lion's share of economic activity -- about two-thirds. It contributed 1.99 percentage points to GDP in the third quarter; the original estimate was a contribution of 2.13 percentage points.
Purchases of durable goods rose 6.0% in July through September, below the previously reported 8.4% increase. Durables dipped 0.1% in the second quarter. Durable goods are expensive items designed to last at least three years, such as cars. Third-quarter non-durables spending increased by 1.1%. Services spending went 3.1% higher.
Federal government spending increased by 1.5%, revised down from an initially estimated 1.7% increase. Second-quarter spending fell 4.5%. State and local government outlays increased 2.6%.
The price index for gross domestic purchases, which measures prices paid by U.S. residents, rose 2.1%, up from a previously estimated 2.0% climb but below the second quarter's 4.0% rise.
The chain-weighted GDP price index rose 1.8%, unchanged from the first estimate but below the second quarter's 3.3% rise.
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