Sales of new single-family homes in the U.S. fell to their lowest level in nearly two years in October, primarily due to rising mortgage rates that pushed buyers to the sidelines, along with disruptions caused by hurricanes.
According to the Commerce Department’s Census Bureau, new home sales dropped 17.3% to a seasonally adjusted annual rate of 610,000 units last month, marking the lowest level since December 2022. The sales pace for September remained unchanged at 738,000 units.
Economists surveyed by Reuters had predicted new home sales, which make up about 15% of total U.S. home sales, would decrease to a rate of 725,000 units. New home sales are recorded at the signing of a contract and can be quite volatile from month to month. Year-over-year, sales fell by 9.4% in October.
Mortgage rates have reversed all the declines that had brought them to a 1.5-year low of 6.08% at the end of September, following the Federal Reserve’s interest rate cuts. By the end of October, the average rate on a 30-year fixed mortgage surged to 6.72%, tracking an increase in 10-year U.S. Treasury yields driven by strong domestic data suggesting a slower pace of rate cuts from the central bank.
Concerns over fewer rate cuts next year have also been heightened by fears of rising inflation. President-elect Donald Trump announced on Monday plans to impose a 25% tariff on all goods from Mexico and Canada and an additional 10% tariff on products from China on his first day in office. Last week, the average 30-year fixed-rate mortgage was reported at 6.84%.
Sales in the densely populated South tumbled 27.7%, likely due to hurricane-related disruptions. Meanwhile, sales dropped 9.0% in the West, but increased by 1.4% in the Midwest and soared 53.3% in the Northeast.
The median price for new homes rose 4.7% to $437,300 in October compared to the previous year. The inventory of new homes climbed to 481,000, the highest level since early 2008, up from 471,000 units in September.
At the current sales pace, it would take 9.5 months to clear the supply of homes on the market, an increase from 7.7 months in September.
