By JOSH BOAK
AP Economics Writer
WASHINGTON (AP) — Sales of new U.S. homes plunged by 5.5 percent in September, showing the fourth straight monthly drop as the housing market cools and mortgage rates rise.
The Commerce Department said on Wednesday that newly built homes sold at a seasonally adjusted annual rate of 553,000 last month. New-home sales in August were downwardly revised, erasing the previously reported gain. The annual rate of home sales has dropped by 15.3 percent since May, overshadowing much of the strength seen in sales in the first five months of 2018.
Builders had assumed that a stronger economy would push up sales, yet a greater share of new houses are going unpurchased. There is 7.1 months’ supply of new homes on the market, the highest level since March 2011, when the real estate bust caused by subprime mortgages was still weighing on the economy.
The housing industry has found itself in a downturn in recent months despite the unemployment rate falling to a nearly half-century low of 3.7 percent.
The National Association of Realtors said last week that existing-home sales — the largest share of the market — had plummeted 3.4 percent in September to a seasonally adjusted annual rate of 5.15 million.
The biggest culprit in the decline in homebuying appears to be higher borrowing costs.
Average 30-year mortgage rates have climbed to 4.85 percent from 3.88 percent a year ago, according to the mortgage buyer Freddie Mac. Increasing interest rates can make homeowners less likely to work on a new property if doing so requires them to spend more each month on repaying a home loan.
The new-home sales report can fluctuate greatly from month to month. But the declines in September were sharpest in the Northeast and West, the two most expensive housing markets. New-home sales slipped in the South and increased in the Midwest.
The average sales price has slumped by 0.6 percent from a year ago, falling to $377,200.