Sales of new homes will fall in October 2024 to the lowest level since November 2022

New home sales slowed significantly to 610,000 annually in October 2024, the slowest pace since November 2022. October 2024 saw record-high median and average new home prices. Interest rates are likely to fall in 2025, which could weigh on mortgage rates and support new and existing home sales in the coming year.

New home sales slowed in October 2024

New home sales fell significantly in October 2024 to a seasonally adjusted annual rate of 610,000 in the Monthly New Residential Sales report released Nov. 26 by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

Sales of new single-family homes slowed significantly, falling 17.3 percent below the revised September figure of 738,000 and 9.4 percent below the October 2023 estimate of 673,000.

Sales of new homes are rising, even as mortgage rates rise

High mortgage rates and high house prices are holding back the sale of new homes. After falling in September, the average 30-year mortgage rate rose in October, likely weighing on new home sales. In addition, mortgage rates rose further in November, which could keep sales of new homes under pressure.

While home prices may not fall significantly nationally over the next two years, mortgage rates are poised to fall as the Federal Reserve continues to cut rates.

Prices set record despite depressed home sales

While mortgage rates were high and new home sales slowed significantly in October 2024, home prices rose to new record highs, average and median prices.

New home prices rose significantly despite a rise in the seasonally adjusted estimate of the number of new homes for sale at the end of October to 481,000, representing 9.5 months of supply at the current sales pace.

The median sales price of new homes sold in October 2024 was a new record high of $437,300, up from $426,800 in September. Additionally, average sales prices rose from $509,900 to a new record high of $545,800.

Inventory of new homes for sale is rising

New median and average home prices rose significantly in October, despite an increase in the seasonally adjusted estimate of the number of new homes for sale to 481,000, representing 9.5 months of supply at the current sales pace. This was the highest months-to-sales inventory ratio in two years – since October 2022.

Looking ahead to the future of new home sales

According to the Federal Open Market Committee’s September 2024 projections, Fed rate cuts are likely in 2025 and 2026. Prestige Economics also expects the Fed to cut rates significantly in 2025 and 2026.

When Fed rates fall, mortgage rates usually drop as well. However, interest rates on longer-term government bonds remain high. If longer-term Treasury yields remain high, mortgage rates may fall more slowly than Fed rate cuts alone would imply.

Positive for housing construction is that the American labor market is strong, which means that demand for housing and prices remain strong. Meanwhile, construction vacancies are high, keeping replacement costs for residential construction high.

Even if mortgage rates remain high, real estate demand and prices appear likely to remain solid. If mortgage rates fall significantly in the coming months, demand for new homes and prices will of course rise significantly.

What do you think of October’s new home sales report?

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