US Housing Market Resilience: New Home Sales Accelerate Despite Rising Rates

The U.S. saw a significant surge in new home sales in September, reaching speeds not seen since early 2022, indicating continued demand for homes despite rising mortgage rates.

According to a Bloomberg report, purchases of new single-family homes rose by 12.3% to an annualized pace of 759,000 last month. This figure surpassed all predictions in a Bloomberg survey of economists.

The new home market has remained stable in the face of soaring mortgage rates and high housing prices. Despite the risk of pushing potential buyers away, the scarcity of listings in the resale market has bolstered the demand for new construction.

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New home inventory reached its highest level since February. Homebuilders have been using financial incentives to attract buyers. PulteGroup Inc. PHM, a homebuilder, has responded by adjusting its product, pricing, and incentive programs to address affordability concerns, according to CEO Ryan Marshall.

The median sales price for a new home fell to $418,800, as reported by the Census Bureau and the Department of Housing and Urban Development. Despite the decrease, this is still significantly higher than pre-pandemic levels.

The sustainability of this sales pace in the face of high borrowing costs remains uncertain. The Mortgage Bankers Association reported an average contract rate on a 30-year fixed mortgage at 7.9% last week, pushing applications for purchase financing to the lowest level since 1995.

Sales increased across all regions, with the Northeast and South leading the pace, the fastest since the end of 2021. New home sales provide a more timely indicator than purchases of previously owned homes, which fell in September to their lowest level since 2010.

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