Key Takeaways:
– Last month, the sales pace of new homes in the United States rose to the highest in over a year.
– The rise is attributed to relaxed mortgage rates, reaching 738,000 homes, which is 4.1% up from August.
– The new homes market is gaining strength, with more buyers due to reluctance from homeowners to sell their properties.
– The median sales price increased to $426,300, a peak from August.
Breaking The Record For Sales
For the first time in over a year, new home sales in America sped past analysts’ expectations last month. The main driving force behind this? Chillier mortgage rates. According to stats from the Commerce Department, the annual rate of new home sales, taking into account seasonal adjustments, vaulted to 738,000. That’s an impressive 4.1% uptick from the revised figure of 709,000 the month before, in August.
A Surprising New Pattern
This recent growth appeared surprising to many economic buffs – it surpassed the average outlook many experts had in mind for the property market. It’s no secret that the property sector gets a bit shaky with changes in interest rates. The Federal Reserve has been busy lately, raising rates quickly to chill demand and tackle high inflation. This blitz has understandably led to the property market coming under some fire.
Yet, a curious pattern emerged. Sales of homes that owners previously lived in were more affected than new home sales. Why? The simple reason: most homeowners are hugging their homes tight. The reluctance to sell from these homeowners is pushing more buyers towards the new homes market.
Less Reluctance, More Sales
This lack of enthusiasm from homeowners to part with their properties is driving the new homes market. It marked a 6.3% increase this September when compared to the same month in 2023, official data highlighted. It seems owners’ love for their homes is working out for the new homes market.
Bernard Yaros of Oxford Economics, a top US economist, pointed out that factors like lower mortgage rates, a buildup of demand, and a pretty scarce supply of existing homes could bolster new home sales into 2025 and beyond. Interestingly, even the usual suspect of hurricanes causing damage and reducing sales did not dampen the sales this time around.
Seeing The Impact
Despite Hurricane Helene, the impact did not show up in the southern region sales, stated Yaros. However, he didn’t eliminate the possibility of ‘hurricane effects’ on the figures in the following months.
Plus, the new homes weren’t more expensive – far from it. The median sales price came out on top in September, rising to $426,300 from the August level.
Good news for prospective homeowners too. For the benefit of many, the popular 30-year fixed-rate mortgage came down from the previous month’s percentage, lasting to the late September period. Freddie Mac’s data revealed the averaged percentage as 6.1.
Fed’s Response
Standing out like a fresh coat of paint from the Fed’s first interest rate trim since 2020 back in September, the rate managed to gain quite a bit in October. Economists predict further rate cuts from the Federal in the coming days.
An economist at Navy Federal Credit Union, Robert Frick, highlighted the new homes market as a ‘bright spot.’ He noticed that builders are focusing on developing smaller, more affordable homes and offering more incentives.
Highs and Lows in the Market
It’s not all winners on the real estate racetrack, though. While the sale of new homes soared, data from the National Association of Realtors pointed out a dip of 1.0% from August to September in the sale of previously owned homes.
So, while some are holding on tight to what they own, others are looking forward to the next best step – investing in new homes. One thing’s for sure, the US new homes market is bustling, and for now, it’s showing no signs of slowing down.