Yesterday, a U.S. housing sales indicator fell to its lowest level since 2010. On Thursday, however, another housing indicator climbed to its highest level since 2023. What is happening behind the scenes?
According to data released on Thursday by the U.S. Census Bureau and the Department of Housing and Urban Development, new home sales in September were strong, reaching an annualized sales rate of 738,000 units after seasonal adjustments. This is the highest level since May 2023, while data for June, July, and August were also revised downward.
This contrasts sharply with data released by the National Association of Realtors on Wednesday, which showed that existing home sales in September fell to an annualized sales rate after seasonal adjustments, marking the lowest point since 2010.
The significant difference between these two indicators is mainly related to the timing of sales statistics. Although both are based on September data, existing home sales are based on closings, while new home sales are based on contracts signed.
Each type of data has its reference value. Since home sales with signed contracts may be canceled before the transaction is completed, not all new home sales mean final delivery. However, it often takes one to two months from contract signing to transaction completion, which means the Census Bureau's statistics can better reflect the housing market conditions of the month.
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This report may bring some positive signals for builders. The iShares U.S. Home Construction ETF rose by more than 1%, surpassing the S&P 500's 0.21% increase. The decline in the 10-year U.S. Treasury yield may also boost builder stocks, as this yield is an important indicator of mortgage rate trends.
The difference in these data may also be related to the types of homes sold. After all, to complete a transaction for an existing home, the seller needs to move elsewhere. The number of existing homes on the market has increased but is still low compared to historical standards. Especially for homeowners who obtained rates below 4% during the COVID-19 pandemic, these individuals lack the motivation to sell.
In contrast, builders have no incentive to hold onto homes. According to data from the National Association of Home Builders, about one-third of builders have chosen to sell at lower prices in recent months, while more than half have offered other incentives, such as preferential mortgage interest rates. The median price of new homes in September was flat compared to the same period last year, while the price of existing homes increased by 3%.
September's new home sales data may indicate that lower mortgage rates have attracted some buyers to enter the market. According to Freddie Mac data, mortgage rates at the end of September fell to 6.08%, the lowest level since 2022, a significant drop from the high of 7.2% earlier this year. If this is the case, existing home sales data may also rebound in the coming months.
However, this trend of declining interest rates has not continued. Freddie Mac's weekly mortgage rate report shows that this week's 30-year fixed mortgage rate has risen to 6.54%, the highest level since August and the largest increase in four weeks since October 2023.Freddie Mac's Chief Economist, Sam Khater, stated in a release: "The continued strong performance of the economy has once again pushed up mortgage rates for the week." The increase in new home sales data for September is undoubtedly an encouraging sign, but whether this growth can be sustained as mortgage rates climb once more remains to be seen.
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