New residential home sales dropped 8.9 percent in October, falling to a new two-year low, according to a new residential sales report released Wednesday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD).
Single-family home sales fell to a seasonally adjusted rate of 544,000 units — a 12 percent increase year-over-year. Nationwide, the average home sold for $395,000 while the median sales price was $309,700. Such a steep drop is, according to analysts, caused by many factors — among them, mortgage rates’ rise to a seven-year high at 4.72 percent in September.
“New home sales continued the slowing trajectory they began in the spring as rising mortgage rates and high prices dampen buyer enthusiasm and hold back sales,” said Danielle Hale, chief economist for Realtor.com, in a statement. “New homes account for a small slice of total home sales, roughly 10 percent, but they are an important measure of the overall health of the housing economy. If tomorrow’s pending home sales data confirms the decrease we saw today, that would be a strong indication of what we could see in existing home sales in the month or two ahead.”
Sales declined even more this month than in September, when new home sales dropped 5.5 percent to a low unseen for nearly two years. However, sales numbers often change unexpectedly from month to month. August, for example, experienced growth of 3.5 percent after two months of straight declines.
Some experts also believe that the various natural disasters to hit Texas and California in the last year could also lead to lower sales as people figure out whether to rebuild or move away.
“The hurricanes in the South and wildfires in the West likely impacted both month’s numbers, and continue to cloud the picture of the housing market’s overall strength,” said Mike Fratantoni, chief economist at Mortgage Bankers Association (MBA), in a statement.
Regionally, the sale of new homes is down 18.5 percent in the Northeast, 22.1 percent in the Midwest, 7.7 percent in the South and 3.2 percent in the West.
“The steep decline in October new home sales was an unpleasant surprise for a market that was expecting at least a modest rebound from an ugly September,” said Zillow’s Aaron Terrazas in a statement. “[…] As we close in on the end of 2018, it is abundantly clear with the benefit of hindsight that the new home sales market took a turn this year, and not for the better.”