New Home Sales Plunge as Bidenflation Interest Rates Hit Hard

PETALUMA, CALIFORNIA - MARCH 23: Homes under construction are seen at a housing developmen
Photo by Justin Sullivan/Getty Images

Sales of newly built homes in the U.S. fell by much more than expected in October and the data for the earlier months was revised down sharply.

The Commerce Department said new home sales fell 5.6 percent to a seasonally adjusted annual rate of 679,000. The September sales figure was revised down from 759,000 to 719,000.

The consensus estimate was for an annual rate of 725,000.

The chart below shows the previous estimates as blue bars and the estimates revised on Monday as red bars.

Sales appear to have been walloped by rising mortgage rates. In October, the average rate for a 30-year fixed rate mortgage rose to almost eight percent. It has since declined as longer-term bond yields have fallen on the view that the Fed is likely done raising rates and will commence rate cuts midway through next year. Swaps prices indicated a greater than even chance the Fed cuts in May of next year and a 75 percent chance of a cut by the June meeting.

The median sales price of a new house sold in October fell to $409,300 from $422,300. Compared with a year earlier, the median sales prices is down 17.6 percent, reflecting the decision by builders to construct less expensive homes in an effort to alleviate affordability constraints created by higher mortgage rates.

The supply of new homes for sale rose by 1.4 percent to a 7.8 months supply, up from 7.2 months in September. The normal range of supply is between four and six months but the low level of previously owned homes for sale have created unusual market conditions in which more demand than is typical is focused on the new home market.

The record high was 12.2 months of supply in January 2009, according to Calculated Risk. The all-time record low was 3.3 months in August 2020, Calculated Risk says.

 

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