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New home sales hit their highest level in more than a year last month, as declining mortgage rates helped spur movement in the housing market.
Sales of new single-family houses hit a seasonally adjusted annual rate of 738,000 in September, according to estimates jointly released by the U.S. Census Bureau and the Department of Housing and Urban Development Thursday.
That’s up 4.1% from August’s revised 709,000 sales and a 6.3% increase from last year’s estimate of 694,000, the agencies said.
But rising rates could put a damper on future sales. The 30-year fixed-rate mortgage popped back up to the mid-6% range in early October and has remained there from lows closer to 6% in the lead-up to the Federal Reserve’s big interest rate cut.
This rise in rates has sent mortgage applications plunging and cast doubt on the hoped-for rapid recovery of the housing sector.
“Mortgage applications declined last week to their lowest since July as the uptick in rates in recent weeks continues to dampen borrower demand for both refinances and home purchases,” said Bob Broeksmit, president and CEO of Mortgage Bankers Association.
“Despite the current rate volatility, rising housing inventory levels and easing home-price growth remain positive developments for prospective buyers this fall,” he added.
Much of the decline in mortgage rates has already taken place, according to Goldman Sachs (GS-0.57%), which lowered its year-end 2024 and 2025 30-year conforming mortgage rate forecasts to 6.0% and 6.05%, respectively. “We think the decline in mortgage rates has largely run its course,” strategists said in a note earlier this month.
Affordability and inventory have been the main challenges impeding a rebound in both home purchases and sales. And housing prices have continued to soar: In September, the median sales price of new houses sold was $426,300, and the average sales price was $501,000, according to government figures.
Inventory is showing signs of loosening. There were 34% more homes for sale on a typical day in September compared with the same period in 2023, according to earlier data from Realtor.com (NWSA+0.72%). That was driven in large part by increased listing activity, with 11.6% more homes newly listed on the market compared with last year — a three-year high and a turnaround from August declines.
The sector is one of the slowest to recover from high rates, given the lagging nature of long mortgage contracts and sticky home prices, even as interest rate cuts and increased activity have pointed to the early days of a resurgence for housing.