WASHINGTON (Reuters) – Sales of new U.S. single-family homes dropped to the lowest level in nearly two years in October, likely as a rise in mortgage rates drove buyers to the sidelines and hurricanes disrupted activity.
New home sales plunged 17.3% to a seasonally adjusted annual rate of 610,000 units last month, the lowest level since December 2022, the Commerce Department’s Census Bureau said on Tuesday. The sales pace for September was unrevised at a rate of 738,000 units.
Economists polled by Reuters had forecast new home sales, which account for about 15% of U.S. home sales, would ease to a pace of 725,000 units. New home sales are counted at the signing of a contract, and can be volatile on a month-to-month basis. They dropped 9.4% year-on-year in October.
Mortgage rates have reversed all of the decline that had pushed them to more than a 1-1/2-year low of 6.08% at the end of September after Federal Reserve began cutting interest rates.
The average rate on a 30-year fixed-rate mortgage jumped to 6.72% by the end of October, tracking a rise in the 10-year U.S. Treasury yields, which have increased on strong domestic data that have suggested a slower path of rate cuts from the U.S. central bank.
Expectations of fewer rate cuts next year have also been strengthened by fears of a resurgence in inflation. President-elect Donald Trump said on Monday he would impose a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on goods from China, on his first day in office.
The 30-year fixed-rate mortgage averaged 6.84% last week.
New home sales tumbled 27.7% in the densely populated South, likely as hurricanes disrupted activity. They dropped 9.0% in West, but rose 1.4% in the Midwest and soared 53.3% in the Northeast.
The median new house price increased 4.7% to $437,300 in October from a year earlier. The inventory of new homes increased to 481,000, the highest level since early 2008, from 471, 000 units in September.
At October’s sales pace it would take 9.5 months to clear the supply of houses on the market, up from 7.7 months in September.