US new home sales drop in October amid higher mortgage rates
By Lucia Mutikani
WASHINGTON (Reuters) -Sales of new U.S. single-family homes fell more than expected in October as higher mortgage rates squeezed out buyers even as prices plunged, but the setback is likely temporary amid a persistent shortage of previously owned houses on the market.
The decline in sales reported by the Commerce Department on Monday was in line with a recent deterioration in homebuilder sentiment, which came as the rate on the popular 30-year fixed-mortgage approached 8%, leaving builders anticipating weaker sales. Mortgage rates have since retreated from two-decade highs and are at levels last seen in late September.
«The market for new homes remains very solid by any historical standard and continues to be boosted by extremely low existing home inventory,» said Daniel Vielhaber, an economist at Nationwide in Ohio.
New home sales dropped 5.6% to a seasonally adjusted annual rate of 679,000 units last month, the Commerce Department's Census Bureau said. September's sales pace was revised lower to 719,000 units from the previously reported 759,000 units.
Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, would fall to a rate of 723,000 units.
New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales increased 17.7% on a year-on-year basis in October.
Monthly sales rose in the Northeast and densely populated South. But they tumbled in the Midwest, the most affordable region, and in the West, where housing is expensive.
The stock of previously owned houses on the market is nearly 50% below its pre-pandemic level, according to the
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