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US new-home sales plunge by 8.9 percent in October

AP Economics Writer

WASHINGTON (AP) — The number of new homes sold in the U.S. plummeted by 8.9 percent in October, even as the number of newly built, unsold homes sitting on the market climbed to its highest level since 2009.

The Commerce Department said Wednesday that new homes sold at a seasonally adjusted annual rate of 544,000 last month. New-home sales have declined in four of the past five months. Over the past year, the number of new homes sold has dropped by 12 percent as higher mortgage rates have caused would-be buyers to back away.

The report adds to the evidence that the U.S housing market has stalled after years in which prices have risen faster than incomes. That situation had been partially offset by the country’s historically low mortgage rates, but the borrowing costs for homeowners shot up after President Donald Trump signed deficit-financed tax reductions into law at the end of last year. The number of existing homes sold has tumbled 5.1 percent this year, marking the largest annual drop recorded by the National Association of Realtors since July 2014.

The mortgage buyer Freddie Mac said that the average rate on the benchmark 30-year mortgage was 4.81 percent last week, up from 3.92 percent a year ago.

The decline has left homebuilders with 336,000 homes listed for sale. That was the highest number seen since January 2009, when the real estate market was still sorting through the wreckage of the country’s latest recession.

The number of new homes sold fell in October in all parts of the country: the Northeast, Midwest, South and West. The median sales price has tumbled 3.1 percent from a year ago to $309,700.

The figures concerning new-home sales came day after a commonly cited index suggested higher mortgage rates were also weighing down home sales. The latest version of the S&P CoreLogic Case-Shiller 20-city index, released on Tuesday,  showed home prices were up by 5.1 percent in September from what they had been a year earlier. That was down from the 5.5 percent year-over-year gain seen the previous month. It was also the sixth straight month in which home-price increases have slowed.

The largest yearly price increases were seen in Las Vegas, San Francisco and Seattle, where prices rose by 13.5 percent, 9.9 percent and 8.4 percent, respectively. The smallest were seen in New York, Washington, D.C., and Chicago, where they increased 2.6 percent, 2.9 percent and 3 percent.

There are signs that Seattle’s housing market is finally cooling off after years of showing double-digit price increases. Its home prices fell in September from the previous month for the third month in a row.

Nationwide, a shortage of homes for sale has plagued potential buyers for the past couple of years, but the stock of unsold homes has grown in recent months. Ralph McLaughlin, deputy chief economist at CoreLogic, a real estate data firm, said that change is bringing supply and demand more into balance.

Still, “years of price growth outpacing income growth, as well as rising mortgage rates, is making the cost of buying homes increasingly expensive,” McLaughlin said.

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