The numbers: U.S. new home sales fell 10.9% to a seasonally-adjusted annual rate of 603,000 in September, from a revised 677,000 in the prior month, the Commerce Department reported Tuesday.
The decline reverses a big gain in August, where new home sales jumped 24.7% from 543,000.
Analysts polled by the Wall Street Journal had forecast new home sales to come in at 593,000 in September.
The sales of new homes are below a peak of 1.04 million in August 2020.
Year-over-year, new home sales are still down by 17.6%.
New home sales rose a revised 24.7% to 677,000 in August, compared with the initial estimate of a 28.8% jump to 685,000.
The new home sales data are volatile month-to-month and are often revised.
Key details: The median sales price of a new home sold in September rose to $470,600, from $436,800 in August. Prices are still below a record high of $479,800 set in July.
The supply of new homes for sale rose by 13.6% between August and September, equating to a 9.2-month supply.
Regionally, the decline in new home sales was led by the South, where sales fell 20.2%, followed by the West.
While the total number of homes sold was lower in the Northeast and Midwest, both regions saw the number grow overall from August — the Northeast by 56%, and the Midwest by 4.3%.
Big picture: Economists didn’t expect the jump in new home sales in August to last.
Because ultimately, mortgage rates surging past 7% has made homeownership unaffordable for many Americans.
Further, there aren’t that many homes on the market, so buyers don’t have much to choose from. And home prices aren’t falling as much yet, due to the shortage in supply.
Builders are signaling a bleak outlook, hence the supply of new homes may be constrained in the future as they potentially pull back construction.
Still, the market is slowly shifting, as home prices continue to hit the brakes. S&P Case-Shiller reported that home prices fell from July to August by 1.1%.
What are they saying? “I’m prepared to bet that new home sales have yet to hit bottom, as mortgage rates continue to climb, hitting 7% this week,” Stephen Stanley, chief economist at Amherst Pierpont, wrote in a note.
“Overall, home sales have downshifted so far this year,” Rubeela Farooqi, chief U.S. economist for High Frequency Economics, wrote in a note. “We do not expect to see much of a recovery in the near term as ongoing increases in mortgage rates weigh on activity in housing.”
Market reaction: The Dow Jones Industrial Average
DJIA,
and the S&P 500
SPX,
were mixed in early trading on Tuesday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
was above 4%.
The homebuilder ETF,
XHB,
was down, while builder stocks, including D.R. Horton, Inc.
DHI,
Lennar Corp
LEN,
PulteGroup Inc.
PHM,
and Toll Brothers Inc.
TOL,
moved higher during morning trading.
