New and existing home sales stumbled in September, as higher interest rates slowed the housing sector amid otherwise positive macroeconomic conditions — including a near 50-year low for unemployment. The average 30-year fixed-rate mortgage now stands at 4.9%, up from 3.95% a year ago.
Due to the higher cost of financing, new single-family home sales fell 5.5% in September from a downwardly revised August estimate. While new home sales remain 3.5% higher on a year-to-date basis, the September rate was the lowest since December 2016. Consequently, inventory increased to an elevated 7.1-months’ supply. Existing home sales declined 3.4% in September, falling to its slowest pace in nearly three years — and 4.1% lower than a year ago.
While economic forecasts, including NAHB’s, have single-family construction rising modestly over the next year, weakness has been felt at both the top and bottom ends of the market. For example, over the past year, there have been nationwide declines in the shares of new home sales priced under $200,000 (whose buyers are typically more sensitive to interest rate hikes) and above $500,000 (higher-priced homes challenged by affordability concerns).
Homes that meet current affordability standards are selling quickly. For new homes, the average time on market was only 2.9 months, down from 3.2 months a year ago. For existing homes, the average home is selling in just 32 days. These data points reemphasize the need for builders to select their market carefully and manage rising construction costs in an otherwise growing economy.
–NAHB Chief Economist Robert Dietz