October New Home Sales Down on Higher Rates

Steadily rising mortgage rates coupled with ongoing affordability challenges kept many potential home buyers on the sidelines in October.

Sales of newly built, single-family homes in October declined 17.3% to a 610,000 seasonally adjusted annual rate, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in October is down 9.4% compared to a year earlier. October new home sales are up 2.1% on a year-to-date basis.

“The decline in new home sales highlights the pressures on prospective buyers who are navigating tighter budgets and higher borrowing costs,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kan. “The drop also reflects a slowdown in buyer activity amid broader economic uncertainty.”

“Higher mortgage rates, up 60 basis points in October per Freddie Mac, and elevated home prices continued to worsen affordability challenges,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “Despite these headwinds, which also include increased material costs for builders, new construction remains a vital part of the market, especially in areas with low existing home inventory.”

A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the October reading of 610,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory in October remained elevated at a level of 481,000, up 8.8% compared to a year earlier. This represents a 9.5 months’ supply at the current building pace. Completed, ready-to-occupy inventory is up 52.6% to a level of 116,000, compared to a year ago. However, that inventory type remains 24% of total inventory.

The median new home sale price in October edged up 2.5% to $437,300 and is up 4.7% from a year ago.

Regionally, on a year-over-year basis, new home sales are up 35.3% in the Northeast and 15.9% in the Midwest. New home sales are down 19.7% in the South and 1.3% in the West.