New Home Sales Fall to Their Slowest Pace Since 2020

Sales of new single-family homes slowed to a 584,000 annual pace in September, the weakest reading since April 2020, according to the Mortgage Bankers Association's Builder Application Survey. That is 12% below August, when the pace was 664,000. Without the seasonal adjustment, builders sold about 47,000 homes in September, down 9.6% from 52,000 in August.

Loan applications for new homes fell too. They were down 8% from August and 8.3% from a year earlier. "Rising mortgage rates in September had a chilling effect for new home purchase activity," said Joel Kan, vice president and deputy chief economist at the MBA. He said both applications and sales fell further behind last year's pace.

First-time buyers took the biggest hit. FHA loans, the program many first-time buyers use, made up 34.7% of applications, down from August. Kan said higher rates put a heavier affordability burden on first-time buyers than on anyone else. Conventional loans made up 50.2% of applications, VA loans 14.1% and USDA loans 1%. The average new home loan rose slightly, to $374,724 from $373,194.

The resale market is slowing as well. Redfin found that pending home sales in September fell to their lowest level in more than a decade, and that a record share of purchase agreements were canceled, outside the pandemic period.

It is a sharp turn from a month ago, when new home sales rebounded as builders cut prices. The MBA survey usually runs ahead of the Census Bureau's new home sales report, so the official October release is likely to show the same drop.

For agents, the practical point is the competition. Builders with unsold homes tend to answer slow months with incentives such as rate buydowns and closing cost credits. If you are listing a resale home near new construction, price it against those offers, not just against other resales. If you are working with buyers, ask the builder's sales office what it will put on the table this month. The figures were first reported by Mortgage Professional.