Sales of new homes in the United States fell in September, high house prices and mortgage rates not seen in over a decade has squeezed potential buyers 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 Wednesday. Economists polled by Refinitiv had expected new home sales – which represent 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 price of new homes climbed nearly 14% in September from the year-ago period to $470,600. It is also an increase of about 8% compared to August. There were about 462,000 new homes on the market at the end of September, according to the report, an increase from 465,000 units in August.
INFLATION RISE MORE THAN EXPECTED IN SEPTEMBER AS PRICES REMAIN VERY HIGH
“The housing market continues to normalize in an economy under pressure from rising borrowing costs, persistent inflation and uncertainty about future Fed activity,” said Jeffrey Roach, Chief Economist at LPL Financial. “Housing demand is likely to decline further over the next few months, putting downward pressure on median prices.”
The interest rate sensitive housing market suffered the brunt of the of the Federal Reserve aggressive campaign to tighten politics and slow the economy. Policymakers have already raised the benchmark federal funds rate five times in a row — including three 75 basis point increases in June, July and September — and have shown no signs of slowing down as they try to crush the inflation which is still close to 40 years. high.
The average rate for a 30-year fixed mortgage climbed 6.94% for the week ended Oct. 20, according to the latest data released Thursday by mortgage lender Freddie Mac. That’s more than double just a year ago, when rates were at 3.09%.
Combined with high home prices, rapidly rising borrowing costs have pushed many first-time buyers out of the market.
A separate report released last week showed existing home sales slowed for the eighth consecutive month.
Used home sales fell 1.5% in September from the previous month to an annual rate of 4.71 million units, according to data from the National Association of Realtors (NAR). On an annual basis, home sales fell 23.8% in September.
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“The housing sector continues to experience an adjustment due to the continued rise in interest rates, which exceeded 6% for 30-year fixed mortgages in September and are now approaching 7%,” the economist said. head of the NAR, Lawrence Yun. “Expensive parts of the country are particularly feeling the pinch and are seeing bigger sales declines.”
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