New Home Sales Take a Tumble, But the Housing Market Still Holds Strong
New US Home Sales Experience Unexpected Drop in October
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US new home sales drop sharply in October, surpassing expectations.
In a turn of events that could make a roller coaster jealous, sales of new U.S. single-family homes plummeted like a lead balloon in October. Much to the chagrin of optimists, the numbers dropped a staggering 5.6%. While this was worse than expected, don’t panic just yet. The housing market is still being propped up by the scarcity of pre-owned properties.
According to the Commerce Department, new home sales slumped to a seasonally adjusted annual rate of 679,000 units last month. This downward spiral comes after September’s sales were revised from 759,000 to 719,000 units. Talk about a wild ride!
The experts predicted a more modest drop, with a projected sales rate of 723,000 units. Looks like even the smartest minds in the industry can’t quite ride this roller coaster without some surprises.
Now, a little insight into how these sales numbers work. New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. However, they can be as unpredictable as a box of chocolates on a month-to-month basis. But fear not, there is a glimmer of hope – sales increased by a whopping 17.7% compared to the same time last year.
So, why are pre-owned properties as rare as a three-dollar bill? Well, the National Association of Realtors reports that the stock of pre-owned houses on the market is nearly 50% lower than its pre-pandemic levels. Homeowners are holding onto their properties like a gold rush prospector with a nugget, and who can blame them? With mortgage rates below 3%, it’s no wonder they’re hesitant to sell. This surge in demand has fueled the need for new construction.
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Just when you thought the roller coaster ride couldn’t get any crazier, mortgage rates decided to join the party. The rate on the oh-so-popular 30-year fixed-rate mortgage sky-rocketed to an average of 7.79% in late October, reaching levels not seen since November 2000. Thanks, Federal Reserve, for turning up the heat to fight inflation.
But wait, there’s more! The 30-year fixed-rate mortgage has since taken a tumble of its own, dropping to an average of 7.29% last week. As the 10-year U.S. Treasury yield declined, mortgage rates followed suit. It seems like the Federal Reserve might be wrapping up its interest rate hikes, with whispers of potential easing by mid-2024.
Torsten Slok, chief ANBLE at Apollo Global Management in New York, summed it up perfectly by saying, “Fed hikes are not having the desired effect because households have locked in low levels of mortgage rates during the pandemic.” You can lead a horse to water, but you can’t make it drink, right?
Despite this wild ride of ups and downs, the demand for new construction has remained strong. In fact, residential investment bounced back in the third quarter after nine straight quarters of contraction. It’s like the housing market has been training for the Olympics of resilience. As a result, the economy grew at an impressive annualized rate of 4.9% for the July-September quarter.
So, while the roller coaster of new home sales may dip and dive, the housing market is far from throwing in the towel. It’s like a daredevil performer, defying gravity and keeping the crowd on the edge of their seats.
Hold onto your hats as we navigate the twists and turns of the housing market. Will sales bounce back with a vengeance, or will they continue to take us on this wild ride? Stay tuned!
Thanks for taking this roller coaster ride with us! If you enjoyed this article, feel free to share your thoughts in the comments below. Have you ever experienced the highs and lows of the housing market firsthand? Let us know! And remember, even if the market takes a dive, there’s always another loop-de-loop just around the corner.
