US: New home sales are likely to continue to decline in the months ahead – Wells Fargo

Data released on Wednesday showed that New Homes Sales fell 10.9% in the United States in September to an annual rate of 603K, above 583K of market consensus. Analysts at Wells Fargo point out sales are likely to continue to decline in the months ahead. 

Key Quotes: 

“August's robust growth in sales, which was driven by a temporary late-summer dip in mortgage rates, was revised slightly lower to a 24.7% gain.”

“Overall, homes priced over $400K comprised 66% of new home sales in September, up from 59% in August. The increase was driven by the share of sales for homes priced between $500-$749K rising to 30% from 24% the month prior.”    

“New home sales are likely to continue to decline in the months ahead. Mortgage applications for purchase have dropped in every week so far in October and, as of October 21, are down 41.8% over the past year. The weakness in mortgage demand is explained by rising mortgage rates which have moved up markedly and are currently hovering above 7%, much higher than in August and September.”