The 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."