US new home sales surge to near 10-year high in October

Sales of new US single-family homes unexpectedly rose in September, to their best level since October 2007, according to official figures released on Wednesday.

Data from the Commerce Department showed new home sales were up 18.9% from August's revised rate to a seasonally-adjusted annual rate of 667,000. Economists had been expecting a drop to 555,000. On the year, sales were up 17%.

Meanwhile, the median price of a new home was $319,700, up from $303,800 in August.

House prices in the Midwest were up 10.6% in September from August, while prices in the West were up 2.9%. Prices in the Northeast were 33.3% higher, while prices in the South were up 25.8%.

Pantheon Macroeconomics said the figures look "spectacular" but cautioned that the margin of error is an astounding astounding +/-19%, so the reported jump in sales might not have happened at all.

"If we take the data at face value, though, most of the rise was in the south, where sales rose to 405K from 322K, presumably boosted by people in the Houston area signing contracts to buy homes in new developments on higher ground. Together with the rising trend in mortgage applications, this could keep sales at an elevated level through Q4, in which case inventory will fall further, pushing up prices more quickly.

"The Census Department said nothing in today's release about the impact of the hurricanes on the reliability of the data, but these numbers are often revised substantially even when the trend is steady, so this report is not the last word. But if it proves correct, new construction will strengthen markedly in Q4 and the residential investment component of GDP will rebound strongly from the 5% decline we estimate for Q3."