New home sales fall 5.5% in September to two-year low

Sales of new homes plunged in September, down 5.5% to settle at almost two years, due to pressure from rising interest rates for the real estate market.

The Commerce Department said sales for the month had reached 553,000 on a seasonally adjusted basis. This figure is 5.5% lower than the revised downward rate of 585,000 in August and 13.2% lower than the 637,000 reported for the same period last year.

September was the worst month since December 2016. This figure is also well below the estimate of economists polled by Reuters who were looking for a drop of 1.4% to 625,000.

The report comes as mortgage rates have risen, with the most recent average at 4.87%, according to Bankrate.com. Housing experts estimate that an average rate of 5% could be a point of inflection for a market under pressure all year due to rising rates.

Despite the big gap in the September figures, real estate shares were generally higher in morning trading. Under the leadership of real estate REITs, the group grew about 0.8% on what was otherwise a downside for the stock market.

Nevertheless, manufacturers are down almost 40% overall since the beginning of the year and the latest data reflect a difficult period for the housing market.

"Anyone who monitors homebuilder inventories or data all year round should not be surprised, but it is clear that this important sector of the US economy, very sensitive to prices and rates , has obviously slowed sharply, "said Peter Boockvar, chief investment officer of Bleakley Consulting Group.

The Federal Reserve raised its benchmark rate three times this year, in the range of 2% to 2.25%. Mortgage rates have increased in kind.

The June and July sales rates were also revised downward. Sales of new homes have now declined for four consecutive months.

From a geographical point of view, the south, which is the largest selling area for homes, was probably affected by Hurricane Florence. The region recorded 318,000 sales for the month, down 1.5%. The Northast, which has generally the lowest sales numbers, has seen its numbers plummet by 40.6%, reaching its lowest level since April 2015.

Only the Midwest rose 6.9%, while the West dropped 12%.

A drop in the median selling price, from $ 331,500 a year ago to $ 320,000 today, left some hope that the market will moderate enough to provide a floor.

"If this becomes a trend and if wage growth continues to strengthen, a revitalized new home sales market could arise next year," said Robert Frick, a business economist at the firm. Navy Federal Credit Union.

The decline in sales, however, has renewed the question of whether the 3% growth path of the economy is sustainable.

While fiscal stimulus has strongly boosted corporate profits and business and consumer confidence are at record levels, the fall in the housing market due to rising rates is a major hurdle in the future.

"One thing is certain, the economy will not be able to grow sustainably at a sustainable rate of 3% if new home sales continue to fall," said Chris Rupkey, chief economist at MUFG. "The rise in the Fed's interest rates could be more damaging to economic growth than it thought, mainly because of its effect on long-term interest rates and hence , on mortgage rates. "