WASHINGTON (Reuters)

Sales of new United States (US) single-family homes unexpectedly increased in August, but the rebound is likely temporary, with the 30-year fixed mortgage rate soaring to levels last seen during the Great Recession.

New home sales surged 28.8 per cent to a seasonally adjusted annual rate of 685,000 units last month, the Commerce Department said today (September 27). July’s sales pace was revised higher to 532,000 units from the previously reported 511,000 units.

Sales increased in all four regions, accelerating 66.7 per cent in the Northeast. Economists polled by Reuters had forecast new home sales, which account for about 10 per cent of US home sales, declining to a rate of 500,000 units.

AGGRESSIVE MONETARY POLICY TIGHTENING

Sales dipped 0.1 per cent on a year-on-year basis in August. They peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006.

The Federal Reserve’s aggressive monetary policy tightening, marked by oversized interest rate increases, has weakened the housing market. The US central bank last week raised its policy interest rate by 75 basis points, its third straight increase of that size.

It signaled more large increases to come this year. Since March, the Fed has hiked its policy rate from near zero to its current range of 3.0 per cent to 3.25 per cent, raising the risks of a recession next year.

Mortgage rates have increased even faster. The 30-year fixed mortgage rate averaged 6.29 per cent last week, the highest since October 2008, from 6.02 per cent in the prior week, according to data from mortgage finance agency Freddie Mac.

MEDIAN NEW HOUSE PRICE WAS US$436,800

Data last week showed sales of previously owned homes falling for a seventh straight month in August, while permits for future homebuilding plunged to levels last seen during the first wave of the COVID-19 pandemic in the spring of 2020.

The median new house price in August was US$436,800, an 8.04 per cent increase from a year ago. There were 461,000 new homes on the market at the end of last month, up from 459,000 units in July. Houses under construction made up 66.4 per cent of the inventory, with homes yet to be built accounting for 23 per cent.

Completed houses accounted for 10.6 per cent of the inventory, well below a long-term average of 27 per cent. At August’s sales pace it would take 8.1 months to clear the supply of houses on the market, down from 10.4 months in July.