WASHINGTON New-home sales managed a small gain in October, but prices tumbled, prior month sales were revised sharply lower, and demand over the past year was down 24%, government data Thursday showed.
Meanwhile, government bean-counters revised up their estimate of third-quarter U.S. economic growth to 4.9%, a full percentage point above their previous estimate. But that did nothing to change expectations that the economy's growth is grinding nearly to a halt in the current quarter.
Underscoring the spreading weakness was an increase in new claims for unemployment insurance to the highest level since February, an indication that the labor market is beginning to deteriorate.
Sales of single-family homes increased by 1.7% last month to a seasonally adjusted annual rate of 728,000, the Commerce Department said. September new-home sales fell 0.1% to an annual rate to 716,000; originally, the government said September sales rose by 4.8% to 770,000.
The median estimate of 19 economists surveyed by Dow Jones Newswires was a 2.6% decrease in October sales to a 750,000 annual rate.
Year-to-year, new-home sales were 23.5% lower than the level in October 2006.
The median price of a new home decreased by 13% to $217,800 in October from $250,400 in October 2006. The average price declined by 0.3% to $305,800 from $306,800 a year earlier. In September this year, the median price was $238,400 and the average was $290,200.
Separately, in just the latest report of falling house prices, the federal Office of Federal Housing Enterprise Oversight said its quarterly measure of home prices, based on sales and refinance transactions of houses with mortgages under $417,000, dropped 0.4% in the third quarter from the second. It was the first dip in nearly 13 years.
"While select markets still maintain robust rates of appreciation, our newest data show price weakening in a very significant portion of the country," said the agency's director, James B. Lockhart. "Indeed, in the third quarter, more than 20 states experienced price declines and, in some cases, those declines are substantial."
The ratio of new houses for sale to houses sold fell during October, going to 8.5 from 9.0 in September. But originally, the government estimated the September ratio at 8.3. Thursday's data showed an estimated 516,000 homes for sale at the end of October, down from September's 528,000.
Regionally last month, new-home sales increased 6.8% in the South, 1.8% in the Northeast and 14.2% in the Midwest. The West tumbled 15.7%. An estimated 57,000 homes were actually sold in October, up from 55,000 in September, based on figures not seasonally adjusted.
Expectations of Stalling Growth
Many economist forecasters anticipate that the U.S. economy will grow at substantially less than a 1% pace in the current quarter. Futures markets now anticipate the Federal Reserve will respond on Dec. 11 with another cut in its key interest rate, now at 4.5%, by at least one-quarter percentage point; markets put the odds of a half-point cut at nearly 50%.
New applications for unemployment insurance rose by a seasonally adjusted 23,000 to 352,000, the highest level since the week of Feb. 10, the Labor Department said. The four-week average of new claims, a more meaningful gauge of underlying trends, increased by 5,750 to 335,250. That is the highest level since March.
The third-quarter economy was "helped by the fact that the credit crunch was barely underway when the majority of this growth data was collected," said economist Rob Carnell of ING Bank. "More timely indicators of the U.S. economy, such as yesterday's Fed Beige book, indicate a much broader weakening of the economy, and also few signs of inflation outside food and energy."
The Commerce Department also reported a decline in several of its measures corporate profits in the third quarter, with cash flow falling for the third quarter in a row. Profits from foreign operations rose, but not enough to offset the decline in domestic products.
The revisions to the third-quarter gross domestic product, widely anticipated, reflect upward revisions to exports and inventories which could portend cutbacks in production in the quarter. Those offset a downward revision to consumer spending, which the Commerce Department says increased at a 2.7% pace in the third quarter.
The Fed's favorite inflation gauge the price of personal consumption expenditures other than food and energy was up by an unrevised 1.8% over last year, higher than the second quarter's 1.4% but still within the Fed's comfort zone.
Brian Blackstone contributed to this article.
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