What happened: Sales of newly-built homes decreased more than expected in October due in part to a large and unexpected uptick in mortgage rates from the September lows and also largely due to disruptions from hurricanes. In October, new home sales declined most in the South, falling by nearly 28%. With the sharp slowdown, new home sales have fallen below last year’s level.
Why it matters: Mortgage rates have a massive impact on buyers’ purchasing power, and big swings in rates are impacting affordability and sales. When mortgage rates fell in September, new home sales reached their highest level since May 2023. In September, the share of existing Zillow listings that were affordable to a middle-income household also hit its highest level since February 2023. However, mortgage rates have rebounded since.
The slowdown in new home sales could be short-lived, as incomes continue to rise faster than prices — improving that portion of the affordability equation — and mortgage rates remain below year-ago levels. With more new construction and more options for potential home buyers, a rebound in new home sales is likely – especially in the south. The latest survey data from the National Association of Home Builders showed builder confidence has continued to rebound.
Affordability and housing availability are slowly improving for potential home buyers.