Sales of US single-family homes tumbled to a more than two-and-a-half year low in October and further evidence suggested that the higher mortgage rate had been hurting the housing market. The commerce department had said of Wednesday that the new home sales in US had plunged to 8.9% and it was the lowest level since March 2016.
The percent wise drop was the biggest since December 2017. New home sales tend to be volatile on a month to month basis. Last week’s US economy data suggested that a moderate increase in the homebuilding alongside, sales of previously owned home in October.
Although the US economy is getting stronger, and perhaps, it has been experiencing its best league since 1980s and 1990s, the housing market is actually taking hits from higher borrowing costs. At this moment, the 30-year mortgage rate resides at 4.81%, not far away from the seven year high of 4.94%, as data from the mortgage finance agency, Freddie Mac mentioned.
This particular issue is also playing a pivotal role behind plunged new home sales. To be precise, the new home purchase has become sluggish due to another important reason, house prices have increased at a rate of 5.1% annually and in contrast to that, the wage growth rose 3.1%.
As an aftermath, the house price growth has been leading the industry to a an acute shortage of properties available for sale.