Data released by the U.S. Department of Commerce on Thursday showed that new home sales in the United States hit a high not seen in over a year in September, surpassing expectations. As mortgage interest rates declined, U.S. real estate buyers responded to further incentives offered by homebuilders for purchasing homes. Additionally, mortgage interest rates reached a recent low point in September, which also boosted new home sales.
Looking at the specific figures, new home sales in the U.S. for September were annualized at 738,000 units, exceeding expectations of 720,000 units, with the August figure at 716,000 units. The month-over-month increase in new home sales was 4.1%, compared to expectations of a 0.6% increase, with the August figure showing a 4.7% decrease.
The median price of new home sales in September remained almost unchanged from a year ago, at $426,300. Nonetheless, this price is still about 30% higher than at the end of 2019.
By region, new home sales in the South climbed to their highest level since April 2021, and sales in the Northeast also picked up.
However, it should be noted that the recovery in new home sales may be temporary. U.S. mortgage interest rates fell to their lowest point in two years in September, but subsequent employment market and inflation data strengthened expectations that the Federal Reserve would take a more gradual approach to rate cuts, and mortgage interest rates have rebounded significantly from their September lows.
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With housing affordability in the U.S. near historical lows, homebuilders have been offering incentives such as price discounts or mortgage interest rate subsidies to boost home sales. This week, Atlanta-based builder PulteGroup Inc. stated in a quarterly earnings call that more incentives would still be needed for the remainder of the year.
After increasing construction efforts during the recovery from the COVID-19 pandemic, builders are now struggling to sell inventory that is hovering near record levels. The supply of new homes increased by 0.4% in September, reaching the highest level since 2008.
The U.S. real estate industry has already begun to look forward to the crucial spring selling season. The builder confidence index released by the National Association of Home Builders (NAHB) reached its highest level in four months in October, partly due to expectations of lower mortgage interest rates.
New home sales account for about 10% of U.S. home sales and are counted at the time of contract signing. Compared to existing home sales, they are a leading indicator of the U.S. real estate market trend. However, it should be noted that new home sales data can fluctuate significantly each month.
Yesterday's existing home sales data showed that the total annualized number of existing home sales in the U.S. in September fell to 3.84 million units, a nearly 14-year low, with home prices rising by 3% year-over-year and inventory continuing to climb. Potential homebuyers are looking forward to further declines in mortgage interest rates and more attractive home prices.
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