The new single-family home sales rollercoaster ride continues. After rebounding in August from a drop in July, new home sales were back down again in September, according to data released Wednesday by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau.
Sales of new single-family homes in September were at a seasonally adjusted annual rate of 603,000, down 10.9% from August and 17.6% compared to a year ago.
“As mortgage rates approach 7.0% there is a mismatch between today’s elevated prices and buyers’ budgets, which has sidelined many buyers in the near term,” Mangold said in a statement. “Motivated buyers who are able to stomach the rate increase or who may be buying in cash are encountering a much less competitive buying landscape than earlier this year.”
The slower sales pace meant that inventory was back up in September. At the end of the month, 462,000 new homes were still for sale, representing a supply of 9.2 months at the current sales pace, up from 8.1 months in August.
Despite the slower sales pace, the median sales price of a new home rose to $470,600 in September, up from $436,800 in August.
“With mortgage rates around 7%, the typical monthly payment for a buyer was about $2,900 last month,” said Lisa Sturtevant, the chief economist for Bright MLS. “Just six months ago, when rates were around 3%, that same house would have had a monthly payment of just $1,900. That is an extra $1,000 a month that families now have to put toward housing that they don’t have available to spend on other things.”
Continuing to add for sale inventory from the new construction industry “is going to be vital to helping stabilize prices and affordability in the long run,” added Zillow senior economist Nicole Bachaud. “But current market dynamics indicate that it might be a while before home builders are willing and able to deliver.”
The slump caused by a historic spike in mortgage rates has forced homebuilders to cancel land deals. To clear the inventory backlog, homebuilders have been offering bonuses to agents and incentives to buyers. Homebuilders have been buying down buyers’ mortgage rates and amenity upgrades.
With fewer buyers, some homebuilders have been selling homes in bulk to investors who plan to rent the properties out.
In its third quarter earnings call, Lennar, the nation’s second largest homebuilder, told investors its new sales orders fell 12% in the third quarter from a year prior. Its average sales price also declined 9% from the second quarter.
And PulteGroup, another large homebuilder, told analysts on Tuesday that 24% of contracts were canceled in the third quarter, up from 15% in the second quarter. Purchase contracts fell 28% from a year earlier, according to Bloomberg. Still, that was better than competitors such as KB Home and Toll Brothers. The slowdown is most pronounced in western states, especially California. PulteGroup’s new orders in the west were down nearly 62% from the year prior.