Existing-home sales in August buckled under pressure from higher mortgage rates. New home sales, a bright spot in an overall dreary housing market, might not be immune.
Sales activity looks unlikely to have rallied in September: Mortgage rates measured by Freddie Mac have remained above 7% so far this month, at a recent 7.19%. One leading indicator of future sales, the volume of applications for home purchase loans, has remained well below year-ago levels this month, according to Mortgage Bankers Association data.
Shares of home builders, who had been the beneficiaries of the unusual housing market dynamic created by higher rates, have fallen recently as mortgage rates have risen. Earlier this year, builders stepped in to fill the void created by homeowners who have stayed put thanks to their ultralow mortgage rates. New home sales, as a result, soared: the metric rose as much as 32% above year-ago levels in July to its highest seasonally-adjusted annual rate since February 2022.
Economists at Fannie Mae, the government-sponsored enterprise that buys mortgages from loan originators in the secondary market, expect sales of new homes to slow in the fourth quarter, and in the first half of 2024. The winter months are typically cooler seasonally, but the higher cost of buying a home—a combination of higher mortgage rates and prices—will add further pressure.
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