Sales of newly built U.S. single-family houses have plummeted to the lowest level in nearly two years as persistent affordability concerns and two major fall hurricanes in the South affected the market, industry observers say.
October new home sales totaled a seasonally adjusted annual rate of 610,000. That's 17.3% lower than the September figure and 9.4% below the same month last year, according to a report Tuesday from the U.S. Census Bureau and the Department of Housing and Urban Development. The October total was the lowest reading since the November 2022 numbers.
Meanwhile, sales prices of new houses continued to increase. The median price in October was $437,300, up 2.5% from September and 5% from October 2023, according to the government data. The median means half the homes sold for more than that number and half for less.
Though the National Association of Realtors said last week sales of existing single-family homes and condos rose slightly in October, the outlook isn't as upbeat for new construction.
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Despite the Federal Reserve lowering interest rates in September and November, consumers, particularly first-time buyers, are struggling, according to the National Association of Home Builders. The lower interest rates so far have not translated to lower mortgage rates for buyers.
“The decline in new home sales highlights the pressures on prospective buyers who are navigating tighter budgets and higher borrowing costs,” said Carl Harris, chairman of the National Association of Home Builders, in a statement. “The drop also reflects a slowdown in buyer activity amid broader economic uncertainty.”
Hurricanes Helene and Milton made landfall 13 days apart in Florida in September and October, and they disrupted construction schedules and ultimately resulted in delayed sales. Florida and the Southeast typically lead the nation in housing sales and construction.
"We expect sales to rebound from their October pace in the months ahead as rebuilding in the South gets underway," said Nancy Vanden Houten, lead U.S. economist for research firm Oxford Economics, in a statement. "Looking into 2025, we look for a small improvement in new home sales based on our forecast for a small, gradual decline in mortgage rates over the course of the year."
Vanden Houten said homebuilder incentives, such as mortgage-rate buy-downs in which builders use sales profits to lower interest rates for buyers, will continue to be a factor next year, "particularly if mortgage rates prove to be stickier than expected."