Rising interest rates appear to be taking a bite out of the housing market. The Commerce Department announced Friday that new home sales dropped 12.8 percent in September, down to the lowest level in nearly two years.
The sales of new single-family homes also decreased to a seasonally adjusted annual rate of 811,000 units last month. That was the lowest level since December 1997, when an annual rate of 791,000 units were sold.
While new-home sales were down in all parts of the country, the average new-home price hit an all-time high last month.
September's performance followed a revised August sales pace of 930,000 units, which was much lower than the 983,000 units the government previously estimated.
Last month's sales were weaker than many analysts expected. They were forecasting a rate of 950,000 units.
The monthly average for a 30-year fixed-rate mortgage in September was 7.82 percent, up from 6.72 percent a year earlier, but lower than August's 7.94 percent average rate, according to Freddie Mac, the mortgage company.
A report released Monday showed Americans bought fewer existing homes in September, deterred by higher mortgage rates and the hurricane.
Even though sales of existing homes fell 2.1 percent in September, the third straight monthly decline, such sales are still heading toward a banner year. That's because low unemployment, tame inflation and stock and bond market gains continue to make Americans feel wealthy and comfortable about making purchases, economists say.
The average price for a new home sold in September set a record of $196,900, up from $192,400 last month.
Meanwhile, the median price for a new home was $160,000, up from August's median price of $153,900. September's median home price tied a record set in April.
By region, the West took the biggest hit, posting a 14.8 decline to an annual rate of 213,000 units in September. In the Midwest, new-home sales fell 14.2 percent to an annual rate of 175,000 units. New-home sales in the South dropped by 11.3 percent to an annual rate of 345,000 units and sales in the Northeast declined by 8.1 percent to an annual rate of 79,000 units.
Federal Reserve policy-makers next meet on Nov. 16 and many analysts expect them to nudge up interest rates for a third time this year to slow the economy and keep inflation under control.
On Thursday, the government reported that the nation's economic growth bounced back at an annual rate of 4.8 percent in the third quarter following a sluggish 1.9 percent growth rate in the spring.
Americans' borrowing costs rose when the Fed raised interest rates twice this year in June and August making borrowing more expensive.