WASHINGTON, Oct. 26, 2023
U.S.New Home Sales Hit Unexpected Low as Mortgage Rates Bite
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New single-family home sales plummeted in September, a sharp reversal that signals housing demand is struggling against persistently high borrowing costs.
- New U.S. home sales dropped considerably in September.
- Higher mortgage rates are cooling housing demand.
- the median sales price saw a notable decrease.
The market for new homes took a tumble in September, with sales falling much harder than economists had predicted. this unexpected drop points to a clear cooling affect from the elevated mortgage rates that are making homeownership a tougher stretch for many Americans.
Sales of new single-family homes fell 18.3% to a seasonally adjusted annual rate of 670,000 units last month. This marks a stark contrast to August’s revised reading of 820,000 units, and it significantly misses the expectations of a slight increase.
The increase in the months of supply, up to 6.7 months from 5.5 months in August, is also noteworthy. Having more homes available is usually a good thing, but when sales are falling, it suggests builders might be facing a tougher time moving their stock.
New homes sold are counted when a sales contract is signed. The government collects this data and adjusts it for seasonal factors.
Regional Variations Emerge
Sales activity varied across the country. The Northeast saw a notable 31.3% decrease in new home sales. The Midwest experienced a 19.6% decline. Sales in the West dropped by 15.4%. The South, however, bucked the trend with a slight 0.7% increase in new home sales for the month.
The stark regional differences highlight how local economic conditions and buyer sentiment can play a big role. While some areas are feeling the pinch more acutely, others are showing a bit more resilience, though the overall picture is one of caution.
The number of homes authorized for sale but not yet started also decreased, which could suggest builders are holding back on future projects in anticipation of continued market softness.This wait-and-see attitude is understandable given the current economic climate.
What is the biggest factor affecting new home sales? Higher borrowing costs, primarily driven by elevated mortgage rates, are the most significant factor stifling demand in the U.S. new home market.
Frequently Asked Questions
Q1: Why did new home sales fall so sharply in September?
A1: New home sales fell sharply in September primarily due to the impact of high mortgage rates on housing affordability, leading to reduced buyer demand.
Q2: What was the median price of a new home in September?
A2: The median sales price of a new home in September was $430,300.
Q3: How much housing inventory was available at the end of September?
A3: At the end of September, there were 452,000 new homes for sale, representing a 6.7-month supply.
Q4: Which region saw the biggest drop in new home sales?
A4: The Northeast region experienced the largest decrease in new home sales, with a 31.3% fall.
The overall trend suggests that while builders are still constructing homes, the high cost of financing is making it harder for them to sell those homes at the pace they’d like. This could led to adjustments in building plans and pricing strategies moving forward.
