New home sales figures exceeded projections in September despite mortgage rates at 23-year high, declining mortgage applications and waning builder confidence.
In September, the sales pace of new homes picked up considerably, up 12.3% compared to August’s revised rate of 676,000. New home sales in September reached a seasonally adjusted annual rate of 759,000, according to data published on Wednesday by the U.S. Census Bureau and the Department of Housing and Urban Development (HUD). On a year-over-year basis, new home sales were up 33.9%.
According to Alicia Huey, chairman of the National Association of Home Builders (NAHB), the lack of existing inventory is the reason why more homebuyers turn to new construction. However, she expects the housing market to slow in the coming months as affordability headwinds persist.
“Higher interest rates not only raise the cost of housing for buyers, but for builders as well because of increased costs for financing construction loans,” she added.
Meanwhile, the median sales price for a new house in September was $418,800, down 3.3% from $430,300 in August. In this difficult housing market, many builders are making adjustments to boost their sales, according to the NAHB. In an October survey, NAHB found that 32% of builders reported cutting home prices while 62% of builders provided sales incentives. The shift towards building smaller homes also influences the downward trajectory of home prices, noted the NAHB in a statement.
Additionally, homebuilders are building more affordable houses, according to Holden Lewis, home expert at NerdWallet. In fact, in September, 44% of new properties were priced under $400,000, compared to 32% a year earlier.
New single-family home inventory remained healthy in September with 435,000 homes available, representing a 6.9 months’ supply at the current sales pace. It is down 5.4% compared to a year ago.
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