Housing Update: New Home Sales Decrease 10% As Mortgage Applications Continue To Falter

Last month, fewer new homes were sold as a result of increased mortgage rates that have turned off some prospective buyers.

According to joint data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, sales of newly built homes decreased 10.9% from August and were down 17.6% from a year ago.

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At a seasonally adjusted yearly rate, about 603,000 new homes were sold last month, down from a revised 677,000 in August; 732,000 newly built homes were sold in the same month a year ago.

The median cost of a new home increased to $470,600 in September from $436,800 in August.

Looking Ahead: According to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending Oct. 21, 2022, new home sales for the month of October will probably remain flat or slightly decline as mortgage applications fell 1.7% from the previous week.

“Mortgage rates increased for the 10th consecutive week, with the 30-year fixed rate reaching 7.16%, the highest rate since 2001,” said Joel Kan, MBA’s vice president and deputy chief economist. “The ongoing trend of rising mortgage rates continues to depress mortgage application activity, which remained at its slowest pace since 1997."

The economist said purchase applications decreased by 2% to the slowest pace since 2015, about 40% slower than last year's pace, while refinance applications were largely steady. There was a minor increase in Federal Housing Administration (FHA) purchase applications despite increased rates and reduced overall application activity, as FHA rates continued to be lower than rates for conventional loans.

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