Sky-high mortgage rates leave homes unaffordable for more, new home sales tumbling
Sales of new U.S. homes hit a 5-month low last month as sky-high mortgage rates continue to strain prospective homebuyers’ ability to afford a dwelling
LOS ANGELES — Sales of new U.S. homes hit a 5-month low last month as sky-high mortgage rates continue to strain prospective homebuyers' ability to afford a dwelling.
The pace slowed 8.7% in August from the previous month to a seasonally adjusted annual rate of 675,000 properties, the Department of Commerce reported this week. Economists polled by FactSet had expected the annual pace to reach 700,000 homes.
“Homebuilders are still benefiting from very low inventory of existing homes for sale, which has driven more buyers to consider new construction, but with mortgage rates elevated and home prices high, affordability is a growing concern for homebuyers," said Lisa Sturtevant, chief economist at Bright MLS.
Mortgage rates are near a 23-year high, forcing many would-be buyers to the sidelines. The average rate on a 30-year mortgage moved above 7% in August for the first time since November and has stayed above that threshold since then, according to mortgage buyer Freddie Mac.
High rates can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already unaffordable for many Americans.
Still, new home sales are up 1.8% through the first eight months of this year compared to the same period in 2022. By comparison, sales of previously occupied U.S. homes are down 21% in the same period.
Homebuilders have been able to mitigate the impact of the elevated mortgage rates on their sales by lowering prices and offering incentives like paying buyers’ closing costs or buying down the rate on their mortgage.
They've also wooed more
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