(Bloomberg) -- Sales of new homes in the US slumped in October to the lowest in almost two years, as two hurricanes hit the South and affordability challenges continued to weigh on buyers.
New single-family home sales decreased 17% last month to a 610,000 annualized rate, according to government data issued Tuesday. The median estimate of economists surveyed by Bloomberg called for 725,000.
Hurricanes Helene and Milton, which tore through parts of the Southeast, delayed sales in the nation’s biggest housing region and dragged down sales overall. Sales in the South decreased 28% to 339,000, the slowest pace since April 2020. Sales also fell in the West, but rose in the Northeast and the Midwest.
The median sale price of a new home increased to $437,300 in October, the highest in 14 months. That partly reflected the drop in sales in the South, where home values are the lowest.
A September jump in nationwide new-home sales sparked by a brief drop in borrowing costs proved short-lived. After dropping to a two-year low that month, mortgage rates are climbing again as investors brace for potentially higher inflation and budget deficits under President-elect Donald Trump’s administration.
“Spiking mortgage rates knocked the wind out of new home sales, as the quick rise from 6% to 7% mortgages pushed buyers to the sidelines,” Robert Frick, an economist at Navy Federal Credit Union, said in a note Tuesday. “And with applications for mortgages falling, we can’t expect a pickup anytime soon.”
Companies have offered sweeteners to lure buyers, including cutting prices and buying down customers’ mortgage rates. The supply of new homes has risen to levels last seen during the Great Recession, with inventory increasing 2.1% to 481,000 homes in October. That represents 9.5 months of inventory at the current sales pace, the highest in two years.
Looking ahead, construction companies are bullish on their prospects under a Trump administration. An index of homebuilder confidence hit a seven-month high this month, reflecting hopes that the incoming Republican leadership at both the White House and in Congress will ease regulations and help boost construction.
Separate data Tuesday showed consumer confidence increased in November to the highest level in more than a year on optimism about the economy and labor market in the wake of Trump’s election victory.
New-home sales are seen as a more timely measurement than purchases of previously owned homes, which are calculated when contracts close. However, the data are volatile. The government report showed 90% confidence that the change in new-home sales ranged from a 30.1% decline to a 4.5% drop.
Data on October pending home sales, which reflect contract signings, are due Wednesday from the National Association of Realtors.
--With assistance from Chris Middleton.
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