U.S. new home sales dropped 8.9 percent in October, as the number of unsold new construction homes on the market reached the highest level since 2009.
The Commerce Department announced Wednesday that brand new homes sold at a seasonally-adjusted rate of 544,000 last month. New-home sales have plummeted for four out of the last five months. Over the past year, new homes sales have dropped 12 percent as rising mortgage rates have scared home buyers away.
The U.S housing market has stalled after years of prices rising faster than incomes. The affordability pressures were offset by record-low mortgage rates, but the borrowing costs for home-buyers shot up after President Trump’s tax cuts, signed into law at the end of last year.
“The main reason it’s cooling is home prices have risen out of reach for more and more buyers,” said Robert Frick, an economist with Navy Federal Credit Union. “That the supply of new homes on the market also increased shows further price declines should be coming.”
Freddie Mac said the average rate on a 30-year mortgage was 4.81 percent last week, up 3.92 percent from one year ago.
The decline has left home-builders with 336,000 homes actively on the market — the highest level since January of 2009, when the market was recovering from the housing bubble.
The median sales price has dropped 3.1 percent from a year ago to $309,700.