Sales of new US single-family homes unexpectedly jumped in October, shrugging off rising mortgage rates and house prices, which have drastically eroded affordability.
New home sales rebounded 7.5% to a seasonally adjusted annual rate of 632,000 units last month, the Commerce Department said Wednesday. September’s sales pace was revised down to 588,000 units from the previously reported 603,000 units.
Sales surged 45.7% in the Northeast and accelerated 16.0% in the densely populated South. But they tumbled 34.2% in the Midwest and fell 0.8% in the West.
Economists polled by Reuters had forecast new home sales, which account for about 10% of US home sales, would decline to a rate of 570,000 units in October. New home sales are volatile on a month-to-month basis. Sales dropped 5.8% on a year-on-year basis in October.
The housing market has been hammered by aggressive Federal Reserve interest rate hikes that are aimed at curbing high inflation by dampening demand in the economy. The 30-year fixed mortgage rate breached 7% in October for the first time since 2002, data from mortgage finance agency Freddie Mac showed. The rate averaged 6.61% in the latest week.
Sales of previously owned homes logged their ninth straight monthly decline in October, while single-family homebuilding and permits for future construction dropped to the lowest levels since May 2020, reports showed last week.
The median new house price in October was $493,000, a 15.4% increase from a year ago. There were 470,000 new homes on the market at the end of last month, up from 463,000 units in September. Houses under construction accounted for 63.4% of the inventory, with homes yet to be built making up 23.6%.
Completed houses accounted for 13% of the inventory, well below a long-term average of 27%. At October’s sales pace it would take 8.9 months to clear the supply of houses on the market, down from 9.4 months in September.