WASHINGTON (Reuters) – Sales of new U.S. 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% to a seasonally adjusted annual rate of 685,000 units last month, the Commerce Department said on Tuesday. 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% in the Northeast. Economists polled by Reuters had forecast new home sales, which account for about 10% of U.S. home sales, declining to a rate of 500,000 units.
Sales dipped 0.1% 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 U.S. 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% to 3.25%, raising the risks of a recession next year.
Mortgage rates have increased even faster. The 30-year fixed mortgage rate averaged 6.29% last week, the highest since October 2008, from 6.02% in the prior week, according to data from mortgage finance agency Freddie Mac.
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 $436,800, an 8.04%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% of the inventory, with homes yet to be built accounting for 23%.
Completed houses accounted for 10.6% of the inventory, well below a long-term average of 27%. 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.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)