Source: Economics Group of Wells Fargo Bank, N.A. Summary New Home Sales Resilient to Rising Mortgage Rates Amid mounting housing market unaffordability, new home sales are still rising on trend as builders successfully employ price discounts and mortgage rate buydowns to sell homes. New home sales advanced 12.3% in September, the largest monthly jump in over a year. This outturn delays concerns of an imminent slowdown. However, the sharp rise in mortgage rates in recent weeks will likely test the new home market, limiting builders’ abilities to sustain the same level of financial incentives.
Sales Move Higher Alongside Price Cuts
- New home sales leaped 12.3% in September in an expectation-defying jump. The 759K-unit sales pace more than reversed August’s 8.2% decline.
- The rebound placed new home sales solidly back onto an upward trajectory. September’s sales pace was up over 30% year-over-year. It was also 40% higher than the low of 543K hit in July 2022.
- Builders are increasingly offering price cuts and other incentives to sell homes in the face of rising affordability concerns. The NAHB builder survey revealed that 62% of builders offered sales incentives in October, tied with the previous cycle high reached in December 2022.