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US new home sales fall in October, missing projections

Rising borrowing costs and elevated prices keeping buyers out of the market

Washington

SALES of new US homes fell in October to the weakest pace since March 2016 as rising borrowing costs and elevated prices keep buyers out of the market.

Single-family home sales fell 8.9 per cent from the prior month to a 544,000 annualised pace, according to government data released on Wednesday. That was below all estimates in Bloomberg's survey of economists, which had called for 575,000, and compares with September's upwardly revised pace of 597,000.

The median sales price dropped 3.1 per cent from a year earlier to US$309,700, the lowest since February 2017, although still out of reach for many potential buyers.

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All four regions showed declines, adding to signs the housing market is cooling amid rising costs of home ownership such as higher borrowing costs, and a scarcity of supply. At the same time, steady job gains and elevated consumer confidence should help underpin demand.

The supply of homes at the current sales rate rose to 7.4 months, from 6.5 months in September. The number of new homes for sale at the end of the month increased 4.3 per cent to 336,000, indicating improving supply.

The results follow data released earlier on Wednesday that showed third-quarter residential investment contracted and was a drag on the expansion. The drop in purchases was led by a 22.1 per cent slump in the Midwest, and an 18.5 per cent decrease in the Northeast. The South had a 7.7 per cent decline while the West fell 3.2 per cent.

New-home purchases are tabulated when contracts are signed, and account for about 10 per cent of the market. They are considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close.

The report, released jointly by the Census Bureau and Department of Housing and Urban Development, tends to be volatile. BLOOMBERG