US new home sales rise to 10-year high because of tight supplies of land and labour shortages

Sales of new US single-family homes unexpectedly rose in October to hit a 10-year high amid robust demand across the country, offering a boost to the housing market.

The upbeat report from the Commerce Department on Monday was the latest indication that housing was regaining momentum after treading water for much of the year because of a dearth of homes for sale and shortages of labour and suitable land for building. It underscored the economy’s strength early in the fourth quarter.

“New home sales are a leading indicator and the jump in October sales are leading the economy higher as we finish out the year,” said Chris Rupkey, chief economist at MUFG in New York. “You have to be very confident to make the biggest big-ticket purchase of your life.”

The Commerce Department said new home sales increased 6.2 per cent to a seasonally adjusted annual rate of 685,000 units in October, the highest level since October 2007. September’s sales pace was revised down to 645,000 units from the previously reported 667,000 units.

Economists had forecast new home sales, which account for 11 per cent of overall home sales, falling 6.0 per cent to a pace of 625,000 units last month. Sales surged 18.7 per cent on a year-on-year basis in October.

New home sales, which have now increased for three straight months, added to strong homebuilding and existing home sales data in painting a positive picture of the housing market after it appeared to stall this year.