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New home sales surge in October, supply dwindles

A new subdivision project of residential homes in shown in Highland, Maryland September 25, 2013. REUTERS/Gary Cameron
A new subdivision project of residential homes in shown in Highland, Maryland September 25, 2013. REUTERS/Gary Cameron

WASHINGTON (Reuters) - Sales of new U.S. single-family homes recorded their biggest increase in nearly 33-1/2 years in October, suggesting the housing market recovery remains intact despite higher mortgage rates.

The Commerce Department said on Wednesday sales jumped 25.4 percent to a seasonally adjusted annual rate of 444,000 units. It also said new home sales fell 6.6 percent in September.

The release of both the September and October reports was delayed because of a 16-day partial shutdown of the government last month.

Economists polled by Reuters had expected new home sales to set a 428,000-unit pace last month. Compared with October last year, new home sales were up 21.6 percent.

The strong rise in new home sales, which are measured when contracts are signed, suggested higher mortgage rate had not derailed the housing market recovery.

Higher mortgage rates have slowed the pace of home sales, but demand for accommodation as household formation continues to recover from multi-decade lows is keeping demand supported.

Home resales fell in October for a second straight month and confidence among single-family home builders has ebbed somewhat since nearing an eight-year high in August.

Strong new home sales in October saw the stock of houses on the market falling 3.7 percent after touching their highest level in nearly three years in September. Despite the tight supply of properties, the median price of a new home slipped 0.6 percent from a year-ago.

At October's sales pace it would take 4.9 months to clear the houses on the market, down from 6.4 months in September. A supply of 6.0 months is normally considered as a healthy balance between supply and demand.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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