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Pressure Points for Home Sales

homesThe sale of new single-family homes saw a month-over-month decline of 8.9 percent to 544,000 in October, according to the latest data on new home sales released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development on Wednesday.

On a year-over-year basis, home sales declined 12 percent compared to October 2017, the report indicated.

“New home sales continued the slowing trajectory they began in the spring as rising mortgage rates and high prices dampen buyer enthusiasm and hold back sales,” said Danielle Hale, Chief Economist at Realtor.com

This was despite a fall in higher-priced homes compared to last year, according to Tian Liu, Chief Economist at Genworth Mortgage Insurance. "The sharp increase in interest rates has led homebuyers to buy lower-priced homes," Liu said. "Except for a few players, the construction industry is vulnerable to this shift as it has focused on building higher-priced homes since 2011."

However, according to Tendayi Kapfidze, Chief Economist at LendingTree, while the decline in home sales is real, it might be overstated. "An upward revision to September sales, from 553 to 597 was likely due to measurement challenges from natural disasters, with August sales also revised upwards. Similar challenges may have affected October’s data and it may be revised upwards in subsequent months," he said. Yet, he agreed with his fellow experts that high mortgage rates were putting pressure on home sales and prices, despite the fact that the "median sales price of $309,700 was the lowest since February 2017."

Despite the declining sales, Hale said that the market was experiencing a new housing bubble. "While numbers of new homes for sale across various stages of construction are increasing, the median number of months that a completed home sits on the market is at an all-time low at 2.7 months," she said.  "This suggests that even as the supply of new homes relative to recent sales is increasing, finished homes are generally selling quickly."

About Author: Radhika Ojha

Radhika Ojha is an independent writer and editor. A former Online Editor and currently a reporter for MReport, she is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Houston, Texas.
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