WASHINGTON (Reuters) – Sales of new US single-family homes increased unexpectedly in August, but the recovery will likely be temporary, with the 30-year fixed-rate mortgage rate climbing to levels last seen during the Great Recession.
The Commerce Department said Tuesday that new home sales jumped 28.8% to the seasonally adjusted annual rate of 685,000 units last month. July sales pace was revised up to 532,000 units from 511,000 units previously reported.
Sales were up in all four regions, accelerating 66.7% in the Northeast. Economists polled by Reuters had expected new home sales, which account for about 10% of US home sales, to fall to an average of 500,000 units.
Sales fell 0.1% year-on-year in August. It peaked at 993,000 units in January 2021, the highest level since the end of 2006.
The Fed’s tight monetary policy, marked by large interest rate increases, has weakened the housing market. Last week, the US central bank raised the interest rate by 75 basis points, the third consecutive increase of this size.
He pointed to more big increases to come this year. Since March, the Fed has raised its policy rate from nearly zero to its current range of 3.0% to 3.25%, raising the risk of a recession next year.
Mortgage rates increased faster. The 30-year fixed-rate mortgage rate reached 6.29% last week, the highest rate since October 2008, from 6.02% the previous week, according to mortgage finance agency data. Freddy Mac (Out of the cabin :).
Data last week showed sales of previously owned homes fell for the seventh consecutive month in August, while permits to build future homes fell to levels recently seen during the first wave of the COVID-19 pandemic in the spring of 2020.
The median price for a new home in August was $436,800, an increase of 8.04% from a year ago. There were 461,000 new homes on the market at the end of last month, up from 459,000 units in July. Homes under construction accounted for 66.4% of the inventory, while homes that were not built accounted for 23%.
Completed homes held 10.6% of the inventory, well below the long-term average of 27%. At the August sales pace, it would take 8.1 months to clear the supply of homes on the market, down from 10.4 months in July.