New-Home Sales Fell Nearly 11% in September Amid Rising Interest Rates
Sales of newly built homes dropped sharply in September from the previous month, the latest sign that rising interest rates are causing an abrupt slowdown in the housing market.
New-home sales fell 10.9% in September from August to a seasonally adjusted annual rate of 603,000, the Commerce Department said Wednesday. From a year earlier, new-home sales fell 17.6%.
While new-home sales figures can be volatile and are often revised, the decline in September marks the fourth time in 2022 that these sales have fallen by 10% or more from the prior month. The September decline was the biggest since a 12.4% drop in April.
The decline in new-home sales follows other recent data signaling the market’s weakness after a nearly two-year housing boom. Existing-home sales have fallen for eight straight months.
Mortgage applications to purchase homes also fell 42% from a year earlier in the week ended Oct. 21, according to the Mortgage Bankers Association, while a measure of home-builder confidence has steadily weakened in recent months.
Home-buying demand has sunk in recent months as higher interest rates raised mortgage payments for many prospective buyers by hundreds of dollars a month.
New-home sales are likely to fall further because mortgage rates have risen in recent weeks. The average rate on a 30-year fixed-rate mortgage was 6.94% last week, up from 3.1% at the end of last year, according to Freddie Mac.
Sales of new homes, which make up about 10% of all U.S. home sales, are tracked when contracts are signed, while existing-home sales are tracked when contracts close. That makes new-home sales a leading indicator of where the market is headed.
The median new-home sales price rose to $470,600 in September, up 13.9% from a year earlier, the Commerce Department said. The price increase was partly due to a shift toward sales of higher-priced homes.
“We expect new home prices to ease in the months ahead as builders cut prices to clear inventory,” Oxford Economics said in a note to clients.
A measure of U.S. home-builder confidence fell for the 10th straight month in October to the lowest level since May 2020, according to the National Association of Home Builders. Many builders are cutting prices, and some have canceled or renegotiated deals to acquire land.
Builders have also slowed construction activity. Single-family housing starts fell 18% in September from a year earlier, according to the Commerce Department.
Still, builders are better prepared to weather a market slowdown than they were heading into the 2007-09 recession, because they have been more conservative in recent years about taking on debt and owning a lot of land, industry analysts said.
Write to Nicole Friedman at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Sales of newly built homes dropped sharply in September from the previous month, the latest sign that rising interest rates are causing an abrupt slowdown in the housing market.
New-home sales fell 10.9% in September from August to a seasonally adjusted annual rate of 603,000, the Commerce Department said Wednesday. From a year earlier, new-home sales fell 17.6%.
While new-home sales figures can be volatile and are often revised, the decline in September marks the fourth time in 2022 that these sales have fallen by 10% or more from the prior month. The September decline was the biggest since a 12.4% drop in April.
The decline in new-home sales follows other recent data signaling the market’s weakness after a nearly two-year housing boom. Existing-home sales have fallen for eight straight months.
Mortgage applications to purchase homes also fell 42% from a year earlier in the week ended Oct. 21, according to the Mortgage Bankers Association, while a measure of home-builder confidence has steadily weakened in recent months.
Home-buying demand has sunk in recent months as higher interest rates raised mortgage payments for many prospective buyers by hundreds of dollars a month.
New-home sales are likely to fall further because mortgage rates have risen in recent weeks. The average rate on a 30-year fixed-rate mortgage was 6.94% last week, up from 3.1% at the end of last year, according to Freddie Mac.
Sales of new homes, which make up about 10% of all U.S. home sales, are tracked when contracts are signed, while existing-home sales are tracked when contracts close. That makes new-home sales a leading indicator of where the market is headed.
The median new-home sales price rose to $470,600 in September, up 13.9% from a year earlier, the Commerce Department said. The price increase was partly due to a shift toward sales of higher-priced homes.
“We expect new home prices to ease in the months ahead as builders cut prices to clear inventory,” Oxford Economics said in a note to clients.
A measure of U.S. home-builder confidence fell for the 10th straight month in October to the lowest level since May 2020, according to the National Association of Home Builders. Many builders are cutting prices, and some have canceled or renegotiated deals to acquire land.
Builders have also slowed construction activity. Single-family housing starts fell 18% in September from a year earlier, according to the Commerce Department.
Still, builders are better prepared to weather a market slowdown than they were heading into the 2007-09 recession, because they have been more conservative in recent years about taking on debt and owning a lot of land, industry analysts said.
Write to Nicole Friedman at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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