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New home sales dip in September
New home sales fell 10.9 percent in September to 603,000 annualized units. Sales in August were revised down 8,000 units. Compared to last year, September sales were down 17.6 percent. NAFCU Chief Economist and Vice President of Research Curt Long analyzed the data in the latest Macro Data Flash report.
“The average 30-year mortgage rate in September was 6.11 percent, but rates have now breached 7 percent,” said Long. “Sales are well off their COVID-era highs but have found some stability in recent months, centered around 600,000 units. That is slightly below pre-COVID sales levels and more in line with sales from late 2018 and early 2019."
Based on current month sales, there were 9.2 months of supply in September – a 1.1 month increase from August. The number of unsold homes left on the market increased by 3,000 to 468,000, a 50.8 percent increase from inventory levels a year ago.
New home sales were mixed through different Census regions in September. The South saw the largest downturn with a 20.2 percent decline in sales, followed by the West (-0.7 percent). In the Northeast, sales rose by 56.0 percent, and in the Midwest by 4.3 percent.
“The National Association of Home Builders/Wells Fargo Housing Market Index found builder sentiment declined for the 10th straight month in September,” Long remarked. “Although single-family housing starts are declining, completions are strong as supply chain issues unwind. That should place downward pressure on prices in the coming months. There are plenty of interpretations of this particular moment in the housing market, but it remains fairly remarkable that sales are roughly consistent with pre-COVID levels despite a 300-basis point rise in mortgage rates."
Of note, the median new home price, non-seasonally adjusted, went up 8.0 percent in September to $470,600, amounting to 13.9 percent higher than a year earlier.
“Sales should continue to slow as rates follow their current course, but a decline in rates–or even a sustained pause–would unlock pent-up demand so long as there is not a major deterioration in the labor market by that time,” concluded Long. “NAFCU expects the weak housing market to extend through the first half of 2023.”
For more economic updates from NAFCU's award-winning research team, view all of NAFCU's Macro Data Flash reports.