Sales of new U.S. single-family homes fell sharply in October, reaching their lowest level since December 2022. The decline was attributed to rising mortgage rates, which discouraged buyers, and disruptions caused by hurricanes in certain regions.
According to the Commerce Department’s Census Bureau, new home sales dropped 17.3% to a seasonally adjusted annual rate of 610,000 units last month, down from September’s unchanged rate of 738,000 units.
Economists had predicted a moderate drop to 730,000 units.
New home sales, which account for about 15% of the U.S. housing market, are recorded at the signing of contracts and are known for month-to-month volatility.
Mortgage rates, which had dipped to a 1.5-year low of 6.08% in late September, rose significantly through October, tracking a climb in 10-year U.S. Treasury yields. The average 30-year fixed mortgage rate hit 6.72% by the end of the month and averaged 6.84% last week. Rising rates were driven by robust economic data and expectations of fewer Federal Reserve rate cuts amid concerns over inflation.
Expectations of persistent inflationary pressures were further heightened by President-elect Donald Trump’s proposal to impose a 25% tariff on imports from Mexico and Canada and an additional 10% tariff on goods from China, effective on his first day in office.
Regionally, new home sales experienced steep declines in the South, where hurricanes led to a 27.7% drop. Sales in the West fell 9.0%, while the Midwest saw a modest 1.4% increase. The Northeast recorded a surprising surge, with sales soaring 53.3%.
Despite the slump in the housing market, consumer sentiment showed resilience in November. The Conference Board’s consumer confidence index rose to 111.7 from 109.6 in October. The Present Situation Index climbed to 140.9, reflecting improved perceptions of current conditions, particularly in the labour market.
“Consumer confidence continued to improve in November and reached the top of the range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board. “November’s increase was mainly driven by more positive consumer assessments of the present situation, particularly regarding the labor market."