Sales of new U.S. single-family homes unexpectedly rose in October, fueled by rising mortgage rates and plummeting home prices, which have led to a sharp decline in affordability.
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The Commerce Department said Wednesday that new home sales rose 7.5% last month to a seasonally adjusted annual rate of 632,000 units. The September sales pace was reduced to 588,000 units from the previously reported 603,000 units.
Sales rose 45.7% in the Northeast and 16.0% in the densely populated South. But they fell 34.2% in the Midwest and 0.8% in the West.
Economists polled by Reuters had forecast new home sales, which account for about 10% of US home sales, would fall by a rate of 570,000 units in October. New home sales are volatile on a month-to-month basis. Sales declined by 5.8% in October on a year-on-year basis.
The housing market has been affected by aggressive Federal Reserve interest rate hikes aimed at preventing high inflation by reducing demand in the economy. The 30-year fixed mortgage rate exceeded 7% in October for the first time since 2002, data from mortgage finance agency Freddie Mac showed. The rate averaged 6.61% in the latest week.
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Sales of previously owned homes posted a ninth straight monthly decline in October, while permits to build single-family homes and future construction fell to their lowest level since May 2020, reports showed last week.
The median price of a new home in October was $493,000, up 15.4% from a year earlier. There were 470,000 new homes on the market at the end of last month, compared to 463,000 units in September. Homes under construction account for 63.4% of the inventory, while homes currently under construction account for 23.6%.
Completed homes accounted for 13% of inventory, well below the long-term average of 27%. It will take 8.9 months to clear the supply of homes on the market at October’s sales pace, down from 9.4 months in September.