WASHINGTON – Sales of new homes fell in October by the largest amount in three months, a fresh sign of the cooling taking place in the once-sizzling housing sector.
The Commerce Department reported Wednesday that new-home sales totaled 1.004 million at a seasonally adjusted annual rate, a 3.2 percent decline from September. That was the largest drop since July, when home sales plunged by 9.2 percent.
Home prices, meanwhile, went up in October, after falling sharply in September.
The median price of a new home sold in October was $248,500, up 1.9 percent from the same month a year ago. The median price is where half sell for more and half sell for less.
The 1.004 million pace of sales logged last month was slightly weaker than the pace of 1.050 million economists were forecasting.
Sales fell in all parts of the country, except for the West, where they went up.
In the Northeast, sales plunged by 39 percent, the steepest drop since January 1996. In the Midwest, they dropped 5.6 percent and in the South, they slipped 1.7 percent. In the West, sales rose 3.2 percent.
At the current sales pace, it would take 7 months to exhaust the supply of unsold homes. That's up slightly from a supply of 6.7 months for September.
The cool down in the once-hot housing market figured prominently in the national economy's 2.2 percent growth rate logged in the late summer, the slowest since the end of last year.
Builders cut spending on home building at an 18 percent annual rate, the most in 15 years, the government said in a separate report. That sliced 1.16 percentage points off third-quarter GDP, the most in nearly 25 years.
Yet outside the struggling housing sector, other parts of the economy remain in decent shape, Federal Reserve Chairman Ben Bernanke said in a speech Tuesday. Consumers and businesses are spending and investing. Employers are hiring and workers' wages are growing solidly.
Economists don't believe the housing slump will short-circuit the five-year-old economic expansion and throw the economy into recession.
Bernanke also struck an optimistic tone on this front, but said there is always the risk of a sharper-than-expected slowdown in the housing sector.
The Fed chief said "the slowing pace of residential construction is likely to be a drag on economic growth into next year." Even though there are signs that the demand for homes is stabilizing, builders still need to work off a bloated inventory of unsold homes and that will take time and further adjustments, he said.