WASHINGTON, Nov 28 (Reuters) – Sales of new U.S. single-family homes tumbled to a more than 2-1/2-year low in October amid sharp declines in all four regions, further evidence that higher mortgage rates were hurting the housing market.
The Commerce Department said on Wednesday new home sales dropped 8.9 percent to a seasonally adjusted annual rate of 544,000 units last month. That was the lowest level since March 2016. The percent drop was the biggest since December 2017.
September’s sales pace was revised higher to 597,000 units from the previously reported 553,000 units. New home sales have dropped in four of the last six months.
Economists polled by Reuters had forecast new home sales, which account for about 9.4 percent of housing market sales, rising 3.7 percent to a pace of 575,000 units in October.
New home sales are drawn from permits and tend to be volatile on a month-to-month basis. They decreased 12.0 percent from a year ago.
Data last week showed moderate increases in homebuilding and sales of previously owned homes in October. The housing market is taking a hit from higher borrowing costs, further pushing homeownership out of the reach of many workers.
The 30-year fixed mortgage rate is currently at 4.81 percent, not far from a seven-year high of 4.94 percent, according to data from mortgage finance agency Freddie Mac.
While house price inflation is slowing as demand for home purchases cools, it continues to outpace wage growth. House prices increased 5.1 percent year-on-year in September. In contrast wages rose 3.1 percent in October from a year ago.
House price growth has been driven by an acute shortage of properties available for sale.
New home sales in the South, which accounts for the bulk of transactions, declined 7.7 percent to their lowest level since July 2017. Sales fell 3.2 percent in the West and plunged 18.5 percent in the Northeast to their lowest level since September 2015. They tumbled 22.1 percent to a 2-1/2-year low in the Midwest.
The median new house price fell 3.1 percent to $309,700 in October from a year ago. There were 336,000 new homes on the market in October, the most since January 2009 and up 4.3 percent from September. Supply is, however, just over half of what it was at the peak of the housing market boom in 2006.
At October’s sales pace it would take 7.4 months to clear the supply of houses on the market, the most since February 2011, from 6.5 months in September.
Nearly two-thirds of the houses sold last month were either under construction or yet to be built.