WASHINGTON (Reuters) - New U.S. single-family home sales fell slightly in October and sales for the prior month were revised sharply lower, casting a faint shadow over one of the brighter spots in the U.S. economy.
The Commerce Department said on Wednesday sales dropped 0.3 percent last month to a 368,000-unit annual rate, while September’s sales pace was revised to 369,000 from 389,000.
The housing sector has been a point of relative strength this year in an economy beset by flagging business confidence and cooling demand from abroad.
A report last week showed a surprisingly sharp gain in home resales in October, while data this week showed prices for single-family homes have risen continuously since February.
Economists expect home construction to add to economic growth this year for the first time since 2005.
Wednesday’s data did not change the view that housing is still in recovery mode, although the pace of new home sales in October was below the level of May, suggesting little upward momentum. “It’s just that progress will be slow,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York.
Separately, the Federal Reserve said in its anecdotal Beige Book report the market for single-family homes improved in most areas of the nation from late-October through mid-November.
The report, based on comments from the Fed’s business contacts, said the economy had grown at a “measured” pace over that period, with consumer spending expanding moderately but manufacturing activity softening. Hiring remained modest, it said.
Weakness in business spending has been restraining growth, but housing has helped offset that. Consumer confidence has also been more bullish.
Wednesday’s home sales report showed the median sales price for a new home in October was 5.7 percent higher than a year earlier, but the pace of year-over-year price gains slowed for a second straight month.
U.S. home-builder stocks fell on the data, even as broad market indexes rose slightly.
Some analysts suggested the decline in sales in October might be partially due to a mammoth storm that slammed into the U.S. East Coast at the end of October. New sales plunged 32.3 percent in the Northeast, which bore the brunt of the storm.
“Some of this could potentially be Hurricane Sandy,” said Megan McGrath, an analyst at MKM Partners in Stamford, Connecticut.
However, the Commerce Department said the storm did not affect data collection at all and its impact on sales was likely “minimal.”
Economists polled by Reuters had forecast sales rising to a 390,000-unit rate last month from September’s previously reported 389,000-unit rate.
To provide support for the housing market, the Fed has kept interest rates at rock-bottom levels since 2008. In September, it launched an open-ended program to buy mortgage-backed securities, driving mortgage rates to record lows.
In a third report, the Mortgage Bankers Association said applications for home purchase loans rose 2.6 percent last week to their highest level of the year.
Additional reporting by Gabriel Debenedetti in New York; Editing by Neil Stempleman and Tim Ahmann