Northwest Arkansas Democrat-Gazette
New-home sales fall in October
8.9% drop is fourth decline in past five months, U.S. reports
Sales of new U.S. homes fell in October to the weakest pace since March 2016 as rising borrowing costs and elevated prices keep buyers out of the market.
Single-family home sales fell 8.9 percent from September to a 544,000 annualized pace, according to government data released Wednesday. That was below all estimates in Bloomberg’s survey of economists, which had called for 575,000, and compares with September’s upwardly revised pace of 597,000.
New-home sales have declined in four of the past five months. Over the past year, sales of new homes have dropped 12 percent as higher mortgage rates have caused potential buyers to back away.
The median sales price dropped 3.1 percent from a year earlier to $309,700, the lowest level since February 2017, though still out of reach for many potential buyers.
All four regions showed declines, adding to signs the housing market is cooling amid rising costs of homeownership, such as higher borrowing costs, and a scarcity of supply. At the same time, steady job gains and elevated consumer confidence should help underpin demand.
The drop in purchases was led by a 22.1 percent slump in the Midwest and an 18.5 percent decrease in the Northeast. The South had a 7.7 percent decline while the West fell 3.2 percent. Home sales in the South were likely hurt by a barrage of hurricanes, while wildfires in the West may have affected sales there, analysts said.
The supply of homes at the current sales rate rose to 7.4 months from 6.5 months in September. The number
of new homes for sale at the end of the month increased 4.3 percent to 336,000, indicating improving supply.
The report adds to the evidence that the U.S housing market has stalled after years of prices climbing faster than incomes. The affordability pressures were offset by historically low mortgage rates, but the borrowing costs for homeowners shot up after President Donald Trump signed deficit-financed tax cuts into law at the end of last year.
Sales of existing homes have tumbled 5.1 percent this year, the largest annual drop
recorded by the National Association of Realtors since July 2014.
“The main reason it’s cooling is home prices have risen out of reach for more and more buyers,” said Robert Frick, corporate economist with Navy Federal Credit Union. “That the supply of new homes on the market also increased shows further price declines should be coming.”
Mortgage buyer Freddie Mac — the Federal Home Loan Mortgage Corp. — said the average rate on the benchmark 30-year mortgage was 4.81 percent last week, up from 3.92 percent a year ago.
The home sales results follow data released earlier
Wednesday that showed third-quarter residential investment decreased and was a drag on the expansion.
New-home purchases are tabulated when contracts are signed and account for about 10 percent of the market. They’re considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close.
The report, released jointly by the Census Bureau and Department of Housing and Urban Development, tends to be volatile.