WASHINGTON- Sales of new US single-family homes unexpectedly fell in September after four straight monthly increases, but the housing market remains supported by record low mortgage rates and demand for more space as the COVID-19 pandemic drags on.
The decrease in sales reported by the Commerce Department followed data last week showing single-family homebuilding and permits racing to levels last seen in 2007 in September. Confidence among homebuilders hit a record high in October, while sales of previously owned homes jumped to their highest level in more than 14 years in September.
“While there could be some ups and downs along the way, we still look for strength in the housing market as low mortgage rates boost activity and earlier pent-up demand for housing is released,” said Daniel Silver, an economist at JPMorgan in New York.
New home sales fell 3.5 percent to a seasonally adjusted annual rate of 959,000 units last month. August’s sales pace was revised down to 994,000 units from the previously reported 1.011 million units. Economists polled by Reuters had forecast new home sales, which account for about 12.8 percent of housing market sales, rising 2.8 percent to a rate of 1.025 million units.
New home sales surged 32.1 percent year-on-year. New home sales are counted at the signing of a contract, making them a leading housing market indicator. September’s monthly decline could, however, be flagging a slowdown in housing market momentum heading into the fourth quarter.
Applications for loans to purchase a home have dropped for four straight weeks. While homebuilder confidence is at historic highs, shortages of land, labor, lumber and other key building materials are lengthening construction times.
“This month’s new home sales figures indicate that the housing market might be finally losing some steam,” said John Pataky, executive vice president at TIAA Bank in Jacksonville, Florida.
Stocks on Wall Street were trading lower, setting the Dow for its worst day in more than seven weeks, dragged down by rising new coronavirus cases. The PHLX housing index fell.
The dollar rose versus a basket of currencies. US Treasury prices were higher.
Though the COVID-19 pandemic has bruised the economy, it has boosted the housing market as Americans flee from city centers to the suburbs and low-density areas in search of more space for home offices and schooling. Staggering unemployment, which has left 23.2 million people on jobless benefits, has disproportionately affected low-wage workers.
Home sales have been concentrated in the single-family segment and in the higher price ranges. Both first-time and second-home buyers have been active in the market, with bidding wars reported in some parts of the country.