Purchases of new homes declined in October to a four-month low, showing the residential real estate market began to soften a month prior to a jump in borrowing costs.
Sales decreased 1.9% to a 563,000 annualized pace, Commerce Department data showed Wednesday. The median forecast in a Bloomberg called for a 590,000 rate.
The government’s new-home data, while volatile from month to month, have been advancing in uneven fashion over the last five years, bolstered by steady job gains and income growth. The market now faces a test after mortgage rates climbed last week by the most since mid-2013.
Estimates ranged from 550,000 to 616,000. The Commerce Department revised the September reading down to a 574,000 pace from a previously estimated 593,000.
The slowdown in demand last month was led by a 13.7% decrease in the Midwest to a six-month low and a 3% drop in the South. In the West, purchases climbed 8.8% to a 148,000 annualized pace, the strongest this year.
The supply of homes rose to 5.2 months from 5 months in September. There were 246,000 new houses on the market at the end of October, the most in seven years. Of those, 42,000 have not yet been started, the most since December 2008.
The median sales price of a new house increased 1.9% from October 2015 to $304,500, Wednesday’s report showed.
New-home sales, which account for about 10% of the residential market, are tabulated when contracts are signed. That makes them a timelier barometer than transactions on existing homes.
Purchases of previously owned home sales unexpectedly rose in October to the highest level since February 2007, National Association of Realtors data showed Tuesday. Resales rose 2% to a 5.6 million annual rate, even as inventory declined from the previous year for the 17th straight month.
Residential real estate has been supported by stronger hiring and historically low mortgage rates. Borrowing costs, which climbed on speculation that President-elect Donald Trump’s economic plans will spark inflation and expectations Federal Reserve policy makers will raise their benchmark interest rate, may be in the process of adjusting to a higher level.
The average rate on a 30-year, fixed mortgage surged 37 basis points last week to 3.94%, the highest since the start of the year. Nonetheless, the rate is still close to the record-low 3.31% reached four years ago, according to Freddie Mac figures dating to 1971.