Sales of latest single-family homes fell greater than expected in August because the rate on the favored 30-year fixed mortgage jumped above 7%, driving potential buyers to the sidelines.
New home sales plunged 8.7% to a seasonally adjusted annual rate of 675,000 units last month, the Commerce Department said Tuesday.
July’s sales pace was revised higher to 739,000 units from the previously reported 714,000 units.
Economists polled by Reuters had forecast latest home sales, which account for a small share of home sales, falling to a rate of 700,000 units.
New home sales are counted on the signing of a contract, making them a number one indicator of the housing market.
They, nevertheless, may be volatile on a month-to-month basis.
Sales increased 5.8% on a year-on-year basis in August.
Though latest home sales remain supported by a dearth of previously owned homes available on the market, the resurgence in mortgage rates is reducing affordability for a lot of prospective home buyers.
The speed on the favored 30-year fixed mortgage vaulted above 7% in August and climbed to a median of seven.19% last week, the very best since July 2001, in response to data from mortgage finance agency Freddie Mac. Mortgage rates are rising in tandem with US Treasury yields, which have surged on worries that soaring oil prices could hamper the Fed’s fight against inflation.
The Federal Reserve last week left its benchmark overnight rate of interest unchanged on the 5.25%-5.5% range.
The central bank, nevertheless, stiffened its hawkish stance, projecting one other hike by yr end and monetary policy staying significantly tighter through 2024 than previously expected.
The Fed has raised the policy rate 525 basis points since March 2022.
Data last week showed the National Association of Home Builders/Wells Fargo Housing Market Index dropped in September below the break-even mark of fifty for the primary time in five months, with the survey’s measure of prospective buyers tumbling to the bottom level since February.
In August, latest home sales fell in the West, Midwest and the densely populated South.
But they rose in the Northeast.
The median latest house price in August was $430,300, a 2.3% decline from a yr ago.
There have been 436,000 latest homes available on the market at the tip of last month, up from 431,000 in July.
At August’s sales pace it could take 7.8 months to clear the availability of homes available on the market, up from 7 months in July.