US New-Home Sales Decline as Rising Mortgage Rates Sap Demand

Sales of new US homes fell in September, resuming a downtrend as decades-high mortgage rates push would-be buyers out of the market.

Purchases of new single-family homes decreased 10.9% to a 603,000 annualized pace following an unexpected gain in August, government data showed Wednesday. The median estimate in a Bloomberg survey of economists called for a 580,000 rate.

The figures reflect a slide in housing demand as the Federal Reserve aggressively boosts interest rates to combat the worst inflation in a generation. Mortgage rates rose to 7.16% last week, the highest level since 2001. That’s sapping affordability, sidelining prospective buyers and leading some measures of home prices to fall.

So far, that hasn’t shown up in prices of new homes. The report, produced by the Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home rose 13.9% from a year earlier to $470,600.

There were 462,000 new homes for sale as of the end of the month, the most since 2008, though the overwhelming majority remain under construction or not yet started. At the current sales pace, it would take 9.2 months to exhaust the supply of new homes, compared with 8.1 months in August and 6.1 months a year ago.

Homebuilder PulteGroup Inc. reported on Tuesday that purchase contracts plunged and deal cancellations spiked in the third quarter. Chief Executive Officer Ryan Marshall said on an earnings call the weaker demand was broad across geographies and consumer groups.