New-home sales declined by 8.7% from July to August to a seasonally adjusted annual rate of 675,000 due to persistently elevated mortgage rates, which now average 7.49%, according to the Washington Examiner. Softening labor markets and worsening housing affordability could put added pressure on buyers and sellers in the months ahead, leading to even cooler demand in the for-sale market.
As owners of existing homes hold off on selling to retain low-rate mortgages, existing home inventory is dwindling, and so is new-construction. Housing starts fell 11.3% from July to August and were down 14.8% year-over-year, the lowest level since June 2020.
"New home sales were weaker than expected in August, although sales for July were revised higher," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics. "We expect new home sales to come under pressure in the months ahead as labor markets soften and homebuying affordability worsens due to the ongoing climb in mortgage rates to a multidecade high."
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