Sales of new US single-family homes fell more than expected in August as the rate on the popular 30-year fixed mortgage jumped above 7%, driving potential buyers to the sidelines.
Sales of newly constructed homes fell 8.7% in August to a seasonally adjusted annual rate of 675,000 from a revised rate of 739,000 in July, the Commerce Department said yesterday. Sales increased 5.8% on a year-over-year basis in August.
Economists polled by Reuters had forecast new home sales, which account for a small share of US home sales, falling to a rate of 700,000 units. New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. However, they can be volatile on a month-to-month basis.
New construction has been attracting determined buyers frustrated by the historically low supply of existing homes. But, affordability concerns remain.
According to data from Freddie Mac, the rate on the popular 30-year fixed mortgage valued above 7% in August climbed to an average of 7.19% last week, the highest since July 2001. Mortgage rates are rising in tandem with US Treasury yields, which have surged on worries that soaring oil prices could hamper the Fed’s fight against inflation.
The Dow Jones Industrial Average fell yesterday after the release of the report, along with the most recent consumer confidence reports, giving the index its worst day since March.
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