(Sept 25): Sales of new homes in the US pulled back in August after a sharp increase in the prior month, as still-high mortgage rates and prices keep homes out of buyers’ reach.

New single-family home sales decreased 4.7% last month to an annualised rate of 716,000 after rising at the fastest pace since early 2022, government data showed on Wednesday. The median estimate in a Bloomberg survey of economists called for a 700,000 pace.

The median sales price, meantime, decreased 4.6% to US$420,600. That marked the seventh straight month of year-over-year price declines, extending what was already the longest streak since 2009.

Despite the decline in sales, sentiment in the housing market is looking up. Mortgage rates are at the lowest level in two years, driven down by expectations of a series of US Federal Reserve interest-rate cuts. 

That’s boosted morale among both consumers and homebuilders, whose outlook for future sales turned positive this month for the first time since May, according to an industry survey. And shares of construction-related stocks have been trading near all-time highs.

Mortgage rates have fallen for eight consecutive weeks, the longest stretch of declines since 2018-2019, which has spurred greater demand for purchasing a home, according to data from the Mortgage Bankers Association. Meantime, the share of consumers planning to buy a home in the next six months rose in September to the highest in a year, according to a survey by the Conference Board.

Falling borrowing costs should ease some of the affordability problems plaguing the housing industry. Builders including Lennar Corp have stoked demand by heavily deploying sales incentives, such as buying down mortgage rates, but it’s coming partly at the expense of gross profit margins, Bloomberg Intelligence analyst Drew Reading said in a Sept 20 note. 

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