US new home sales fall 0.6% in September as mortgage rates rise to 7.32% amid Middle East conflict

Sales of new single-family homes in the US fell 0.6% in September as higher mortgage rates linked to the Middle East conflict made it harder for buyers to afford homes. Sales fell to a seasonally adjusted annual rate of 676,000 units in September, the US Census Bureau said on Tuesday. This was lower than the revised annual rate of 680,000 units recorded in August.US new home sales fell in September as mortgage rates rose to 7.32%. (AP)The government revised August's new home sales rate to 680,000 units from the earlier estimate of 684,000 units, showing that sales were weaker than previously reported, according to the Census Bureau.Economists polled by Reuters had expected new home sales to fall to an annual rate of 650,000 units in September. The actual figure of 676,000 units was higher than their forecast, even though sales declined from August.US housing market demand weakensNew home sales dropped 5.3% in September compared with the same month a year earlier, showing that demand remained under pressure. New home sales are recorded when a sales contract is signed or the transaction closes, making them one of the earliest indicators of demand in the housing market. However, new homes account for only a small share of total US home sales, Reuters reported.Also read: Wall Street eyes Midterm election rally as Fed decision and big tech earnings loom Mortgage rates rise to 7.32%The average interest rate on a 30-year fixed-rate mortgage reached 7.32% last week, according to mortgage finance firm Freddie Mac. The rate has increased by more than 130 basis points since the US and Israel attacked Iran at the end of February.Higher mortgage rates linked to the Middle East conflict have increased borrowing costs for people looking to buy homes. This has made home purchases more expensive and weakened demand in an already difficult housing market, according to Reuters.US housing affordability crisis deepensRising mortgage costs have added to what economists describe as a housing affordability crisis. The issue has also become a major part of campaign messaging ahead of the US midterm elections scheduled for next Tuesday.New home sales fell in the Midwest and South regions in September. However, home sales rose sharply in the Northeast and West. This shows that demand for homes changed across different parts of the US, according to Census Bureau data cited by Reuters.A survey by the National Association of Home Builders last week showed that builders expected fewer home sales over the next six months. Their expectations fell to the lowest level since April 2012. This comparison does not include the sharp fall in the early days of the COVID-19 pandemic.Also read: S&P 500 investors face new risks as Spacex-Tesla merger, Anthropic IPO plans emergeNew home prices fall 3.9%The median price of a new home fell 3.9% in September from a year earlier to $400,400. This may be because fewer people wanted to buy homes and builders cut prices to attract buyers.Most new homes sold in September cost less than $499,999. This means many buyers chose homes priced below $500,000, even though the median home price remained high. The number of new homes available for sale also fell. It dropped to 476,000 in September from 481,000 in August, according to government data cited by Reuters.US housing supply keeps builders cautiousAt September's sales pace, it would take about 8.4 months to sell all the new homes available on the market. This was slightly lower than the 8.5 months recorded in August.Even after the monthly decline, the supply of homes remained high enough to discourage builders from starting new single-family housing projects. Builders may be less willing to begin construction when many homes are still waiting to be sold, according to Reuters.Government data released the previous week showed a sharp decline in single-family housing starts in September. Housing starts measure the number of new homes on which construction has begun.Permits for future construction also dropped in September to their lowest level in three-and-a-half years. The decline suggests that builders were becoming more cautious about starting new projects as housing demand and affordability remained under pressure.