New Home Sales Tumble in September as Mortgage Rates March Higher

Published by FOX Business | October 26, 2022

Sales of new U.S. homes fell less than expected in September

Sales of new U.S. homes tumbled in September as high home prices and mortgage rates not seen in over a decade edged prospective homebuyers out of the market.

New single-family home purchases fell 10.9% to a seasonally adjusted annual rate of 603,000 units, the Commerce Department reported on Wednesday. Economists surveyed by Refinitiv expected new home sales—which account for a small percentage of total sales—to fall 13.9% last month.

On an annual basis, new home sales are down 17.6%.

The median new house price climbed nearly 14% in September from the year-ago period to $470,600. That is also up about 8% from August. There were about 462,000 new homes on the market at the end of September, the report shows, an increase from 465,000 units in August.

“The housing market is still normalizing to an economy under pressure from higher borrowing costs, nagging inflation and uncertainty about future Fed activity,” said Jeffrey Roach, the chief economist at LPL Financial. “Housing demand will likely fall further in the coming months, putting downward pressure on median prices.”

The interest rate-sensitive housing market has borne the brunt of the Federal Reserve’s aggressive campaign to tighten policy and slow the economy. Policymakers already lifted the benchmark federal funds rate five consecutive times—including three 75-basis-point increases in June, July and September—and have shown no sign of slowing down as they try to crush inflation that is still running near a 40-year high.

The average rate for a 30-year fixed mortgage climbed to 6.94% for the week ended Oct. 20, according to the latest data released Thursday from mortgage lender Freddie Mac. That is more than double just one year ago, when rates stood at 3.09%.

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