New home sales in the United States rose more than the previous month in September Mortgage rates were above 7%, Financing a home is expensive and drives people out of the market.
Sales of newly constructed homes rose 12.3% in September to a seasonally adjusted annual rate of 759,000 from a revised rate of 676,000 in August, according to a joint report from the U.S. Department of Housing and Urban Development and the Census Bureau. Sales increased by 33.9% over last year.
This marks the fastest pace of sales since February 2022 and easily beats analysts’ expectations for a pace of 680,000 sales.
Sale of existing houses It has been declining since February and is down 20% year-to-date in September from a year ago. There is currently an inventory and affordability crunch as homeowners with 3% or 4% mortgage rates are reluctant to sell and buy another home at a much higher price. In August, rates rose to 7% as the Federal Reserve tackled inflation.
Average rate for a 30-year, fixed-rate mortgage Last week it was 7.63%. According to Freddie Mac, there are signs it will continue to climb.
“With one more Fed interest rate hike expected for the year, interest rates are not expected to drop anytime soon,” said Kelly Mangold of RCLCO Real Estate Consulting.
New construction is an attractive alternative, attracting committed buyers frustrated by the historically low supply of existing homes. Still, there are affordability concerns.
“The constraints in the housing market have created a significant amount of unmet demand, and more and more families are deciding to buy despite current market conditions because they live in the homes they grew up in,” Mangold said.
According to the report, new home sales activity increased the most in the South, “an area that continues to perform well due to land, population and job growth and a relatively low cost of living,” Mangold said.
Although new home sales are a much smaller share of the overall sales market than existing home sales, the inventory picture for new construction homes is much higher.
The seasonally adjusted estimate of new homes for sale at the end of September was 435,000. This represents a 6.9 month supply at the current sales pace.
By comparison, there were 1.13 million homes for sale at the end of September, or the equivalent of a 3.4-month supply at the current monthly sales pace.
In general, the ratio of existing homes to new homes is closer to 5 to 1, but recently it has been closer to 2 to 1, according to the National Association of Realtors.