US new home sales hit highest rate in over a year

US new home sales hit highest rate in over a year

A lack of inventory for existing properties has raised demand for new homes, despite high mortgage rates
A lack of inventory for existing properties has raised demand for new homes, despite high mortgage rates. Photo: JOE RAEDLE / GETTY IMAGES NORTH AMERICA/Getty Images via AFP/File
Source: AFP

Sales of new US homes picked up more than anticipated in September, government data showed Wednesday, with the tight supply of real estate pushing more buyers into the market for new properties.

Sales of new single-family houses increased to an annual rate of 759,000 last month, seasonally adjusted, the Commerce Department said in a statement.

This was the fastest pace since February 2022, while August's figure was also revised slightly upwards to 676,000, according to official figures.

The median sales price of new houses sold slipped, however, to $418,800 in September.

A lack of inventory for existing homes has raised demand for new properties, despite high mortgage rates that came about after the US Federal Reserve rapidly lifted the benchmark lending rate to fight inflation.

September's sales figure this year is around 34 percent higher than that of the same period a year ago.

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Weak overall demand

The "shift in purchases towards new homes, due to the lack of existing home supply, is continuing to offset extremely weak aggregate housing demand," said Kieran Clancy, senior US economist at Pantheon Macroeconomics.

But he expressed caution over a large margin of error in the data.

Clancy noted that the jump in sales clashes with a "collapse in homebuilders' confidence and the flattening trend in single-family building permits."

While sales has gone up, he expects they will not do so for long.

Last month, sales of existing homes, which form the majority in the market, hit the lowest rate in 13 years, according to industry data.

"While new home sales may continue to be more resilient than existing home sales, we expect they will weaken in the fourth quarter," said economist Nancy Vanden Houten of Oxford Economics in a note.

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This is due to 23-year-high mortgage rates and a slowing economy and labor market, she added.

As of October 19, the popular 30-year fixed-rate mortgage averaged 7.6 percent according to home loan finance company Freddie Mac. This is the highest in more than two decades, and markedly above the level a year ago.

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Source: AFP

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