U.S. new home sales dip in October; September revised higher

WASHINGTON, Nov 25 (Reuters) - Sales of new U.S. single-family homes fell in October, though remaining at higher levels amid record low mortgage rates and demand for more space as the COVID-19 pandemic drags on.

New home sales dipped 0.3% to a seasonally adjusted annual rate of 999,000 units last month, the Commerce Department said on Wednesday. September's sales pace was revised higher to 1.002 million units from the previously reported 959,000 units.

Economists polled by Reuters had forecast new home sales, which account for more than 12% of housing market sales, rising 1.5% to a rate of 970,000 units in October.

New home sales surged 41.5% year-on-year. New home sales are counted at the signing of a contract, making them a leading housing market indicator.

The housing market is being driven by record low mortgage rates. The COVID-19 pandemic, which has seen at least 21% of the labor force working from home, has led to a migration from city centers to suburbs and other low-density areas as Americans seek out spacious accommodation for home offices and schools.

The coronavirus recession, which started in February, has disproportionately affected lower-wage earners. At least 20.5 million people are on unemployment benefits. The 30-year fixed mortgage rate is around an average of 2.72%, the lowest rate since the survey started in 1971, according to data from mortgage finance agency Freddie Mac.

Homebuilder confidence is at historic highs, though builders complain about shortages of land and materials.

In October, new home sales increased 5.1% in the Northeast. They rose 11.2% in the Midwest, but decreased 2.0% in the South, which accounts for the bulk of transactions. Sales fell 1.5% in the West.

The median new house price increased 2.5% to $330,600 in October from a year ago. There were 278,000 new homes on the market last month, unchanged from September. At October's sales pace it would take 3.3 months to clear the supply of houses on the market, unchanged from September. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)