New home sales in the United States hit the fastest pace in more than a year on lower interest rates, according to government data.
New home sales in the United States hit the fastest pace in more than a year on lower interest rates, according to government data. AFP

Sales of new homes in the United States last month exceeded analyst expectations Thursday, logging the fastest pace in more than a year on the back of cooler mortgage rates.

Sales of new homes stood at an annual rate of 738,000, seasonally adjusted, 4.1 percent up from the revised August figure of 709,000, said the Commerce Department.

The rate was higher than a consensus of analysts expected.

The property market, which is sensitive to interest rate changes, has taken a hit since the Federal Reserve rapidly hiked rates to ease demand and battle inflation.

But sales of previously owned homes have been more impacted as existing homeowners remained reluctant to sell their properties -- pushing more buyers into the new homes market and giving it a boost.

The September sales rate was also 6.3 percent above the figure from September 2023, official data showed.

"We expect lower mortgage rates, pent-up demand, and a still relatively scarce supply of existing homes to support new home sales over the balance of 2024 and into 2025," said lead US economist Bernard Yaros of Oxford Economics.

"There was no discernible impact on sales in the South from Hurricane Helene," he added, noting that "hurricane effects" may impact the data in the coming months.

The median sales price was $426,300, up from the level in August, the Commerce Department added.

As of late September, the popular 30-year fixed-rate mortgage averaged 6.1 percent, down from the prior month according to Freddie Mac data.

The rate picked up slightly again in October, however.

The change comes after the Fed made its first interest rate cut since 2020 in September, and is anticipated to lower rates further.

Calling the new homes market a "bright spot," Navy Federal Credit Union economist Robert Frick added: "Builders are constructing smaller, more affordable homes, and offering more incentives."

On Wednesday, sales of previously owned homes retreated 1.0 percent from August to September, according to the National Association of Realtors.

Mortgage