Sales of new single-family homes in the United States have crashed to the lowest level recorded in nearly two years last month, which could possibly be due to increasing mortgage rates and elevated prices of houses.
That is according to a new report from the Commerce Department's Census Bureau. The report, published Tuesday, noted that the number of new homes sold in October fell by 17.3% to a rate of 610,000 (seasonally adjusted). It is the lowest level recorded since December 2022.
In comparison, the rate of new homes sold in September was 738,000. Additionally, it was 9.4% lower than the sales of new homes in October 2023, which was estimated to be around 673,000, the report noted.
New home sales are counted at the signing of a contract.
Why Are Home Sales Sluggish?
One of the reasons why home sales fell last month could be due to rising mortgage rates. At the end of September, the contract rate for the 30-year mortgage term - the most popular option among Americans - was 6.08%, which was the lowest level recorded in more than a year. This decline came after the Federal Reserve cut its interest rates by half a percentage point weeks earlier.
However, the average 30-year mortgage rate jumped to 6.72% by the end of last month due to strong economic and domestic data. It increased to a further 6.84% last week.
In addition to elevated mortgage rates, the cost of buying a typical single-family home in the US in October was $424,271, according to data from real estate website Redfin. That marked a 5.1% increase year-over-year from the same month in 2023 and a 13.5% increase from October 2021.
Where Did Home Sales Fall the Most?
New home sales tumbled the most in the South, where hurricanes disrupted home-buying activities. The region sold 27.7% fewer homes in October. The number of homes sold in the West also fell by 9.0% in the same period.
That said, new home sales soared in the Northeast and Midwest, where shares rose by 35.3% and 15.9%, respectively.
