U.S. new home sales fall in September; prices continue to rise
By Lucia Mutikani
WASHINGTON (Reuters) - New single-family home sales in the US fell unexpectedly in September after four consecutive monthly gains. However, the real estate market continues to be propped up by record-low mortgage rates and demand for more space as the COVID-19 pandemic drags on.
The drop in sales reported by the Department of Commerce on Monday followed last week's data showing single-family home construction, and allows races to the levels last seen in September 2007. Builder confidence reached a record high in October, while home sales rose to their highest level in more than 14 years in September.
However, the decline in new builds should indicate a slowdown in the real estate market's momentum in the fourth quarter. New home sales are counted when the contract is signed, making them a leading indicator of the real estate market.
New home sales declined 3.5% last month to a seasonally adjusted annual rate of 959,000 units. The sales pace in August was reduced from previously reported 1.011 million units to 994,000 units. Economists polled by Reuters had forecast new home sales, accounting for about 12.8% of property market sales, up 2.8% to 1.025 million units.
US stocks traded lower. The dollar rose against a basket of currencies. US Treasury bond prices were higher.
The COVID-19 pandemic has sparked migration to the suburbs and sparse areas as Americans seek more space for home offices and schooling, making the housing market the star of the economic recovery from the recession that began in February. The staggering unemployment rate, at which 23.2 million people received unemployment benefits, has disproportionately affected low-wage workers, who are usually young and renters.
Last month's decline in new home sales didn't change expectations that the property market likely contributed to a strong recovery in economic activity in the third quarter. Growth estimates for the July-September quarter are 35.2% on an annual basis, which would make up for about two-thirds of the output lost by the coronavirus.
The economy contracted 31.4% in the second quarter, its deepest decline since government records began in 1947. The government is expected to release its snapshot of third quarter GDP on Thursday.
The 30-year fixed mortgage rate averages 2.80%, according to the Freddie Mac mortgage finance agency. However, activity in the real estate market could slow down in the fourth quarter, with home loan applications falling in the past four weeks, likely due to scarce supply.
In September, new home sales in the Northeast fell 28.9%. They fell 4.7% in the south, which is the bulk of transactions, and 4.1% in the midwest. In the west, however, sales rose by 3.8%.
The median price for new homes rose 3.5% year over year to $ 326,800 in September. New home sales last month were focused in the $ 200,000 to $ 399,000 price range.
There were 284,000 new homes on the market last month, up from 282,000 in August. At the sales pace in September, it would take 3.6 months to clear the supply of houses in the market, up from 3.4 months in August. Just over two-thirds of the homes sold last month were either under construction or had yet to be built.
(Reporting by Lucia Mutikani; editing by Chizu Nomiyama and Andrea Ricci)
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