The leading indicator of the U.S. housing market, new home sales, fell more than 17% month-on-month in October, while the price increase in 20 cities slowed down in September

The data released by the U.S. Department of Commerce on Tuesday showed that new home sales in the U.S. plummeted in October, marking the largest month-over-month decline since July 2013, falling short of all analysts' expectations in a media survey. New home sales in September had reached a more than one-year high, but the recovery in the housing market was short-lived.

Specifically, new home sales in the U.S. in October were annualized at 610,000 units, the lowest level since November 2022, with expectations set at 725,000 units and a previous value of 738,000 units in September. New home sales fell 17.3% month-over-month in October, against an expected decline of 1.8%, while the previous month's value showed a month-over-month increase of 4.1%. Year-over-year, new home sales in October decreased by 9.4%.

Regionally, sales in the southern region dropped by 28%, the lowest since April 2020, while sales in the western region also declined, and sales in the northeastern and midwestern regions saw an increase. Hurricanes Helen and Milton hit parts of the southeastern U.S., causing delays in sales in the country's largest real estate market and dragging down overall sales.

Bloomberg expects that new home sales in the U.S. this year will reach 680,000 units, compared to 666,000 units last year.

The median price of new homes sold in October rose by 3.8% year-over-year to $437,300, the highest level in 14 months, while the average selling price of new homes in October was $545,800.

After ramping up construction during the recovery from the COVID-19 pandemic, builders are currently struggling to sell inventory that remains at high levels. The number of new homes for sale increased by 2.1% month-over-month in October to 481,000 units. At the current sales pace, it would take about 9.5 months to deplete the supply on the market, compared to 7.7 months last month.

Mortgage rates in the U.S. fell to a two-year low in September, but subsequent employment and inflation data strengthened expectations that the Federal Reserve would take a more gradual approach to interest rate cuts, leading to a significant rebound in mortgage rates since the September low.

Due to housing affordability in the U.S. being close to historical lows, home builders have been offering incentives such as price discounts or mortgage rate subsidies to boost home sales.

New home sales account for about 10% of total home sales in the U.S. and are counted when contracts are signed, making them a leading indicator of trends in the U.S. real estate market compared to existing home sales. However, it is important to note that new home sales data can be quite volatile on a monthly basis.

Data released last week on existing home sales showed that total existing home sales in the U.S. rose by 3.4% month-over-month in October, marking the largest increase since February of this year, and the first year-over-year increase in over three years. The median sales price of existing homes in October rose by 4% compared to the same period last year, reaching a new high. The inventory of existing homes in October was 1.37 million units, an increase of 19.1% year-over-year On the same day, the United States released important housing price data, showing that the growth rate of housing prices in 20 cities is slowing down:

The S&P/CS 20-City Composite Home Price Index in the U.S. rose 4.57% year-on-year in September, the lowest growth rate since September 2023, with an expected increase of 4.7% and a previous value of 5.2% in August.

The seasonally adjusted S&P/CS 20-City Composite Home Price Index in the U.S. rose 0.18% month-on-month in September, with an expected increase of 0.3% and a previous value of 0.35% in August.

The FHFA House Price Index in the U.S. rose 0.7% month-on-month in September, with an expected increase of 0.3% and a previous value of 0.3% in August.

By region, according to S&P/CS data, housing price growth in U.S. West Coast cities is rapidly slowing, with month-on-month declines in Seattle, San Diego, Los Angeles, San Francisco, and Portland.

The financial blog Zerohedge points out that the growth rate of U.S. housing prices is closely related to the scale of bank reserves held by the Federal Reserve, with a lag of 6 months, which indicates that the pace of housing price increases may further slow down.