New home sales increase in September to highest rate in 19 months
Zachary Halaschak
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Sales of new homes shot up in September, a sign that some buyers are wading into the housing market even as mortgage rates soar to multiyear highs.
New home sales rose 12.3% from August to September to a seasonally adjusted annual rate of 759,000, according to a report Wednesday from the Census Bureau. The number of new homes sold is the highest it has been since February of last year.
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The reading comes amid persistently higher mortgage rates, which last week rose to their highest level in 23 years.
Sales in September were 22.9% higher than in September 2022.
The median sales price for a new home was $418,800 in September, a decrease from the month before.
As of Tuesday, the average rate on a 30-year, fixed-rate mortgage was 7.9%, according to Mortgage News Daily, which tracks daily changes in rates.
Last week, mortgage rates peaked at 8.02%. The last time rates passed 8% was in 2000, according to separate records maintained by Freddie Mac.
Part of the reason why new home sales might be remaining strong is because people who locked in low mortgages during the pandemic aren’t selling because of the higher mortgage rates now, taking away existing home inventory and putting pressure on new home sales.
“New home sales surprised to the upside in September as a lack of existing homes for sale and builder incentives continue to prop up the market for new homes,” Oxford Economics economists wrote in a note. “While new home sales may continue to be more resilient than existing home sales, we expect they will weaken in the fourth quarter in the face of mortgage rates at a 23-year high and a slowing economy and labor market.”
The housing market has been torn into by the higher mortgage rates, which have put home purchases out of reach for many prospective buyers. The higher rates have also caused many homeowners to avoid selling because they do not want to give up mortgages they locked in during the ultra-low interest rate period following the pandemic.
Existing home sales last month slowed 2% to a seasonally adjusted annual rate of 3.96 million, the National Association of Realtors reported last Thursday. That is the lowest level since 2010, showing the damage higher rates have done to housing affordability and demand.
Additionally, the pace of existing home sales in September was down a massive 15.4% from the year before.
It isn’t clear just how high mortgage rates could surge, although much of that will depend on whether the Federal Reserve hikes its interest rate target again.
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Most investors think that the Fed is done tightening, but Fed Chairman Jerome Powell has taken pains to leave the door open to the possibility, although he has hinted there will be no increase during the Fed’s next meeting at the end of the month.
“Given the uncertainties and risks and how far we have come, the committee is proceeding carefully,” Powell said during a recent policy speech. “We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks.”