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New-home sales dropped 5.6 percent during October as mortgage rates hit new highs and pummelled housing demand.
Sales of newly built single-family homes clocked in at a seasonally adjusted annual rate of 679,000 during October, according to the United States Census Bureau — 5.6 percent lower than the levels recorded in September but 17.7 percent higher than the levels seen one year earlier, according to data released Monday.
That dropoff came amid mortgage rates as high as 8 percent, averaging 7.62 percent throughout October as a whole, forcing some prospective homebuyers to delay their purchases, experts said.
“Fewer people bought new homes in October as would-be buyers postponed their purchases in hopes that mortgage rates would drop,” Holden Lewis, a home and mortgage expert at the personal finance website NerdWallet, said in a statement.
Sales were still up on a yearly basis as buyers continued to turn to newly built inventory to make up for the lack of resale inventory — brought on, in part, by high mortgage rates.
“Despite the challenging conditions, sales are up 4.6 percent on a year-to-date basis due to a lack of inventory in the resale market,” said Alicia Huey, chairman of the National Association of Home Builders.
The median sales price of new homes sold in October was $409,300 — down 3.1 percent from September and 17.6 percent from a year ago. Experts attributed the price drop to builders pricing their homes to sell amid high mortgage rates and a shift in builder activity towards smaller, more affordable homes.
“Median new home prices have moved lower as new home size has decreased in 2023,” said NAHB Chief Economist Robert Dietz. “Combined with sales incentives and a lack of resale inventory, demand has remained solid in 2023 and should improve in 2024 as interest rates move lower.”
New single-family home inventory increased 8.3 percent during October to 439,000, the highest level recorded since January and representative of a supply of 7.8 months at the current building pace.
Newly built homes made up 30 percent of the total inventory of homes for sale during the month, compared to a historical average of 12 percent.
