New home sales fall in October 2024 to their lowest level since November 2022

New home sales slowed significantly in October 2024 to 610,000 on an annual basis, the slowest pace since November 2022. Record high median and average new home prices were reached in October 2024, supporting new and existing home sales in the coming year.

New home sales slowed in October 2024

In the monthly new home sales report released Nov. 26 by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, new home sales declined significantly in October 2024 to a seasonally adjusted annual rate of 610,000.

Sales of new single-family homes slowed significantly, falling 17.3 percent below the revised September rate of 738,000 and 9.4 percent below the October 2023 estimate of 673,000.

New home sales are rising even as mortgage rates rise

High mortgage interest rates and high real estate prices are slowing new home sales. After falling in September, the average 30-year fixed mortgage rate rose in October, likely negatively impacting new home sales. Additionally, mortgage rates continued to rise in November, which could keep new home sales under pressure.

While home prices nationwide may not fall significantly over the next two years, mortgage rates are likely to fall as the Federal Reserve continues to cut rates.

Despite declining home sales, prices are reaching record highs

While mortgage rates were high and new home sales slowed significantly in October 2024, home prices rose to new record high median and median prices.

New home prices increased significantly, although the seasonally adjusted estimate of new homes for sale rose to 481,000 at the end of October, equivalent to 9.5 months of supply at the current sales rate.

The average sales price of new homes sold in October 2024 was a new record high of $437,300, up from $426,800 in September. Additionally, average sales prices rose from $509,900 to a new record high of $545,800.

The inventory of new homes for sale is increasing

New median and average home prices increased significantly in October, although the seasonally adjusted estimate of new homes for sale rose to 481,000, equivalent to 9.5 months of supply at the current sales rate. This was the highest month-to-sales inventory ratio in two years – since October 2022.

A look into the future of new home sales

According to the Federal Open Market Committee’s September 2024 forecasts, Fed rate cuts are likely in 2025 and 2026. Prestige Economics also expects the Fed to cut interest rates significantly in 2025 and 2026.

When Fed rates fall, mortgage rates typically fall as well. However, interest rates on longer-term government bonds remain elevated. If longer-term Treasury yields remain high, mortgage rates could fall more slowly than Fed rate cuts alone would imply.

One positive for housing is that the U.S. labor market is strong and demand and prices for residential real estate remain high. Meanwhile, the number of construction job vacancies remains high, keeping the cost of housing replacement high.

Even if mortgage rates remain high, real estate demand and prices are expected to remain stable. Of course, if mortgage rates fall significantly in the coming months, demand for new homes and prices are likely to rise significantly.

What do you think of the October new home sales report?

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