New home sales in the US defied expectations and rose in October, government data showed Wednesday, despite mortgage rates remaining high.
Although sales surged during the pandemic, the sector cooled with the central bank raising the benchmark lending rate multiple times this year to ease demand and tamp down soaring inflation.
But sales of new single-family houses picked up 7.5 percent to a seasonally adjusted annual rate of 632,000 in October, said the Commerce Department, despite analyst expectations of a dip as higher rates bite.
The median sales price for a new home in October rose to $493,000 as well, up from September’s revised figure of $455,700.
Monthly data can be volatile, and some observers have pointed to a rush to lock in mortgage deals before rates increased further as a reason that sales surged previously.
Another factor analysts have cited is a lack of existing inventory, nudging buyers into the market for new property, supporting sales.
In October, the sales pace remained below that of the same period in 2021.
The latest figures come as the US’s much bigger existing home sales market slipped for a record nine consecutive months.
“The increase in sales came despite a rise in new home prices,” said Nancy Vanden Houten of Oxford Economics in an analysis.
But she noted that this reflected a shift in composition of sales, towards homes priced above the median.
“We expect sales to remain under pressure going forward as the erosion in affordability this year keeps many buyers on the sidelines,” she said.
Home sales have eased “sharply” overall, added economist Rubeela Farooqi of High Frequency Economics.
“Pressure is likely to persist in the near term as low inventories, still-high prices and elevated mortgage rates weigh on activity,” she added in an analysis.