New-home sales skyrocketed in September, soaring to the highest level since February 2022, according to data released Wednesday by the U.S. Census Bureau and the Department of Housing and Urban Development.
Despite mortgage rates reaching new highs, sales of newly constructed homes jumped 12.3 percent in September to a seasonally adjusted annual rate of 759,000 — 33.9 percent above the levels recorded in September 2022.
The steep uptick in sales of newly built homes was motivated by the severe lack of inventory across the country, as would-be homesellers refrain from listing their homes and losing their lower mortgage rate, as rates hover around 8 percent, expert said. While September saw an uptick in activity in the new-build sector, the continued volatility of mortgage rates would likely stifle sales moving forward, experts predicted.
“While more buyers are turning to new construction because of a lack of existing inventory, higher mortgage rates that are approaching 8 percent are expected to slow the market in the coming months as affordability conditions continue to worsen,” National Association of Home Builders Chairwoman Alicia Huey said. “Higher interest rates not only raise the cost of housing for buyers, but for builders as well because of increased costs for financing construction loans.”
New housing starts, representing the number of homes builders commenced work on, ticked up 7 percent on a monthly basis in September.
The median sale price of new homes sold in September was $418,800, while the average sales price was $503,900 according to the Census Bureau — both decreases from the August median price of $430,000 and the August average price of $514,000. Experts attributed this decrease to builders constructing smaller, cheaper homes to appeal to buyers on a budget.
“To compensate for this high interest rate environment, more builders are building smaller homes, which has resulted in a decline in the median new home price,” Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis said in a statement.