US Home Sales Rise In August: Temporary Relief In A Downtrend?

After months of going down, sales of new homes unexpectedly increased despite widespread turbulence in the housing market.

In August, new home sales increased by 28.8% to a seasonally adjusted annual rate of 685,000, the Census Bureau reported on Tuesday.

Although the growth is positive for the housing market, new home sales have generally declined significantly in recent months as a result of interest rate hikes by the Federal Reserve.

However, August's report should at least temporarily ease concerns that the country is teetering on the brink of a recession.

“With housing affordability at a more than a 10-year low and the Federal Reserve continuing to aggressively raise interest rates to rein in stubbornly high inflation, policymakers must find ways to reduce construction costs that are delaying home projects and putting upward pressure on home prices,” said Jerry Konter, chairman of the National Association of Home Builders.

Read Also: Moving Trends: The Top States Americans Are Relocating To

While it is important to keep in mind that new home sales are a volatile indicator, August's report may exaggerate actual sales as it does not fully take into consideration the recent rise in cancellations as a result of rising mortgage rates.

In August, the median sales price for a new home was $436,000, down from the previous month.

The information was released a week after it was disclosed that existing house sales had dropped for a seventh straight month and are currently at their lowest point since the beginning of the COVID-19 pandemic.

According to data released by the National Association of Realtors, existing-home sales decreased by 0.4% in August to a seasonally adjusted annual pace of 4.8 million. Sales were down about 20% from the previous year.

Mortgage rates are significantly influenced by the Fed's interest rate targets. Since the Fed began raising interest rates this year, mortgage rates have been rising quickly alongside it.

According to Freddie Mac, the typical 30-year fixed-rate mortgage had a rate of 6.29% as of Tuesday, an increase of more than 3.4% over the previous year. The typical fixed-rate 15-year mortgage increased to 5.44%.

The central bank raised interest rates by 0.75% last week, marking the third 3/4 increase in less than four months.

The likelihood of a recession has been increasing as inflation appears to be more deeply ingrained in the economy than previously assumed and the Fed keeps raising rates.

For the prospective buyer who can’t wait for a downturn to purchase their dream home, mortgage lender NASB Financial Inc. NASB is offering a variety of banking products including checking, savings and certificate of deposit accounts. It is also offering mortgage and refinancing options, including self-employed mortgage options for the handyman or self-incorporated day trader.

Photo: Billion Photos via Shutterstock