New home sales plunged in September, falling 5.5 percent to an almost two-year low amid pressures from rising interest rates that have hammered the real estate market.
The Commerce Department reported that sales for the month came in at 553,000 on seasonally adjusted basis. That’s 5.5 percent below the downward revised August rate of 585,000 and a 13.2 percent tumble from the 637,000 reported for the same period a year ago.
September represented the worst month since December 2016. The number also was well below the estimate from economists polled by Reuters who were looking for a 1.4 percent drop to 625,000.
The report comes as mortgage rates have been drifting higher, with the most recent average at 4.87 percent, according to Bankrate.com. Housing experts believe a 5 percent average rate could be an inflection point for a market under pressure all year from rising rates.
The Federal Reserve has hiked its benchmark interest rate three times this year, to a target range of 2 percent to 2.25 percent. Mortgage rates have risen in kind.
June and July sales rates were also revised lower. New home sales have now declined for four straight months.
From a geographic standpoint, the South, which is the biggest area for home sales, likely saw some impact from Hurricane Florence. The region reported 318,000 sales for the month, a decline of 1.5 percent. The Northast, which usually has the lowest number of sales, saw its numbers collapse by 40.6 percent to the lowest level since April 2015.
Only the Midwest saw a gain, rising 6.9 percent, while the West declined 12 percent.
A decline in median sales price, from $331,500 a year ago to $320,000 now, provided some hope that the market is moderating enough to provide a bottom.
“Should that become a trend, and should wage growth continue to strengthen, a revitalized new-home-sales market could occur next year,” said Robert Frick, corporate economist at Navy Federal Credit Union.