U.S. new home sales edge lower in September as mortgage rates weigh on demand

Traders Union
All News
Economic Data
US new home sales edge lower

Highlights

U.S. new single-family home sales fall 0.6% in September to a 676,000 annual rate, with the median price down 3.9% to $400,400.
Mortgage rates average 7.32% last week, up over 130 basis points since February, intensifying the housing affordability crisis before midterm elections.
Single-family housing starts and permits drop to a 3-1/2-year low, while new home supply declines to 476,000 units, taking 8.4 months to clear inventory.

September sales data and pricing trends

As reported by Reuters, citing the Commerce Department's Census Bureau, sales of new U.S. single-family homes fall 0.6% in September to a seasonally adjusted annual rate of 676,000 units, partially reversing August's increase. August's pace is revised down to 680,000 units from the previously reported 684,000 units.

Economists polled by Reuters had expected sales to decline to a 650,000-unit rate. New home sales, which are counted at contract closing and represent a relatively small share of overall U.S. home sales, drop 5.3% from a year earlier.

Regionally, sales decline in the Midwest and South, but surge in the Northeast and West. The median new house price falls 3.9% from a year earlier to $400,400 in September, with most homes sold during the month priced below $499,999.

Housing affordability and construction outlook

The average rate on a 30-year fixed mortgage has surged by more than 130 basis points since the U.S. and Israel attacked Iran at the end of February. Freddie Mac data show the rate averages 7.32% last week, deepening what economists describe as an affordability crisis ahead of next Tuesday's midterm elections.

A National Association of Home Builders survey last week shows builders' sales expectations for the next six months tumble to the lowest level since April 2012, excluding the early COVID-19 pandemic slump. Elevated inventory is also discouraging new single-family construction activity.

The supply of new houses on the market falls to 476,000 units in September from 481,000 in August. At the current sales pace, it would take 8.4 months to clear the inventory, down from 8.5 months in August, while government data reported last week show a sharp drop in single-family housing starts and permits for future construction falling to a 3-1/2-year low.

Our earlier article on UBS Global Wealth Management’s outlook for the Federal Reserve described how persistent inflation is pushing expectations toward a longer tightening cycle, including additional rate hikes beyond the recent move. We also noted that market pricing increasingly reflected a higher-for-longer rate path, implying elevated borrowing costs and tighter financial conditions for households and businesses.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.