Sales of new homes declined in October, showing that the housing market is languishing under the pressure of soaring mortgage rates.
New home sales fell 5.6% from September to October to a seasonally adjusted annual rate of 679,000, according to a report Monday from the Census Bureau.
GLOOM: CONSUMER SENTIMENT FALLS AND INFLATION EXPECTATIONS RISE
But sales in October were 17.7% higher than in September 2022. The median sales price for a new home was $409,300 in October, a decrease from the month before.
“New home sales surprised to the downside in October as climbing mortgage rates were an unavoidable drag,” Oxford Economics analysts wrote in a note on the release. “With mortgage rates coming off their multidecade high, new home sales may perk up in November. A frozen existing home market, along with homebuilder incentives, will also lend some support to the market for newly built homes.”
The reading comes amid persistently higher mortgage rates. Mortgage rates recently crossed the 8% threshold, the highest in 23 years, before pulling back.
As of Monday, the average rate on a 30-year, fixed-rate mortgage was 7.32%, according to Mortgage News Daily, which tracks daily changes in rates.
The mortgage rates have created an unusual dynamic between the sales of new and existing homes as people who locked in low mortgages during the pandemic aren’t selling because of the higher mortgage rates now, taking away existing home inventory and putting upward pressure on new home sales.
Existing home sales once again slowed in October, falling to their lowest level in more than a decade amid higher mortgage rates. Home sales in October slowed 4.1% to a seasonally adjusted annual rate of 3.79 million, the National Association of Realtors reported last week.
The pace of existing home sales was down 14.6% from the year before.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
The high housing costs have, at least for the time being, priced people out of the housing market and so they have been forced to rent. Rents have been softening as mortgage rates rise as well.
A recently released report from Rent.com found that rents fell by just over 1.6% in October. The national median rent price is now $1,978, the cheapest price recorded since April and the first time in five months that the median price has fallen below $2,000.
