New home sales fell in September rising mortgage rates which have driven some buyers away from the housing market.
New home sales fell 10.9% in September from August and 17.6% from a year ago, according to a joint report by the US Department of Housing and Urban Development and the US Census Desk.
Some 603,000 new homes were sold last month, at a seasonally adjusted annualized rate, compared to a revised 677,000 in August. A year ago, 732,000 newly built homes were sold.
Meanwhile, the median price of a new home hit $470,600, up 13.9% from a year ago. The price also rose from the median price of $436,800 in August.
There were stark regional differences in new home sales, with the South being the hardest hit and the North East seeing a huge increase in sales activity.
New home sales fell month over month in the South, down 20.2%, and in the West, down 0.7%. But sales were up 56% in the Northeast and 4.3% in the Midwest from August.
“New home sales took a hit in September, battered by rising mortgage rates that are now hovering around 7%,” said Robert Frick, business economist at Navy Federal Credit Union. “Inventories and new home prices remain high, so a drop in mortgage rates and prices would likely trigger a buying rush, but we shouldn’t expect such conditions until next year at the earliest. ”
Until that happens, there will be a mismatch between high prices and buyers’ budgets, said Kelly Mangold of RCLCO Real Estate Consulting.
“Motivated buyers who are able to afford the rate increase or who can buy with cash face a much less competitive buying landscape than at the start of this year,” she said.
If rates continue to rise, it’s likely that the selling market will continue to slow towards the end of the year – and house prices will fall, Mangold said.
“All of this is happening at a time when there remains strong demographic demand for new homes for sale,” Mangold said. “Many households would prefer to have more space and may find themselves in a housing situation that is not their ideal – so it will be important to monitor conditions closely, as there is likely still to be significant pent-up demand when the conditions will begin to improve. ”