Despite remaining higher than that of 2018, sales of new U.S. single-family homes unexpectedly fell in October following recent strong gains The overall housing market remains supported by lower mortgage rates.
New home sales in the South, which accounts for the bulk of transactions, fell 3.3% in October while sales in the Northeast tumbled 18.2%. The majority of home sales increased 4.2% in the Midwest and jumped 7.1% in the Midwest. Economists polled by Reuters had forecast new home sales, which account for about 11.3% of housing market sales, would increase 1.1% to a pace of 709,000 units in October. With most home sales being that of new construction.
The median new house price fell 3.5% to $316,700 in October from a year ago. Sales last month were concentrated in the $200,000-$400,000 price range. Homes priced below $200,000, the most sought after, accounted for only 9% of sales.
Reports last week showed housing starts surging and building permits vaulting to more than a 12-year high in October, and home resales advancing. Though housing accounts for a fraction of gross domestic product, it has a bigger economic footprint.
But the housing market momentum could slow as mortgage rates have backed up in the last two months, partly driven by ebbing fears of a recession amid a de-escalation in trade tensions between the United States and China. Borrowing costs, however, have reduced for the first time since 2008.
The 30-year fixed mortgage rate is currently at 3.66%, still below its peak of 4.94% in November 2018, according to data from mortgage finance agency Freddie Mac.
There were 322,000 new homes on the market last month, up 0.3% from September. At October’s sales pace it would take 5.3 months to clear the supply of houses on the market, up from 5.2 months in September.
About two-thirds of the houses sold last month were either under construction or yet to be built.