New home sales fall 17% to 2-year low as rising mortgage rates crowd out buyers

Sales of new single-family homes in the US fell to their lowest level in nearly two years in October, likely as rising mortgage rates put buyers on the sidelines and hurricanes disrupted activity.

Sales of new homes fell 17.3% to a seasonally adjusted annual rate of 610,000 units last month, the lowest level since December 2022, the Commerce Department’s Census Bureau said on Tuesday.

The sales pace for September was unchanged at a rate of 738,000 units.

Economists polled by Reuters had forecast that new home sales, which account for about 15% of US home sales, would ease to a pace of 725,000 units.

New home sales are calculated at contract signing and can fluctuate from month to month.

They fell 9.4% year-on-year in October.

Mortgage rates have reversed all of the decline that had pushed them to more than a 1-1/2-year low of 6.08% in late September after the Federal Reserve began cutting interest rates.

The average rate for a 30-year fixed-rate mortgage jumped to 6.72% by the end of October, following a rise in 10-year Treasury yields, which have risen on strong domestic data that have suggested a slower rate cut path from the central bank.

Expectations for fewer rate cuts next year have also been bolstered by fears of a resurgence in inflation.

President-elect Donald Trump said Monday he would impose a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on goods from China, on his first day in office.

The 30-year fixed-rate mortgage averaged 6.84% last week.

New home sales fell 27.7% in the densely populated South, likely after the hurricanes disrupted activity. They fell 9.0% in the West, but rose 1.4% in the Midwest and rose 53.3% in the Northeast.

The median price of new homes rose 4.7% to $437,300 in October from a year earlier. The inventory of new homes rose to 481,000, the highest level since the start of 2008, from 471,000 units in September.

At the pace of October sales, it would take 9.5 months to clear the supply of homes on the market, up from 7.7 months in September.