But new homes only account for about 14% of the US home sales. The housing market, more broadly, remains persistently frozen as affordability constraints shut out prospective buyers.<\/p>\n
Nancy Vanden Houten, a lead US economist at Oxford Economics, cautioned that the jump in new home sales in August “likely overstates any improvement in housing activity”. New home sales tend to be volatile month-to-month, she said.<\/p>\n
“Take the gain with a huge grain of salt,” economists at Wells Fargo wrote in a research note. <\/p>\n
“New home sales are prone to heavy revisions. A flat-ish trend in sales, similar to what has been evident all year, seems more likely,” they added.<\/p>\n
In a report from the National Association of Home Builders and Wells Fargo this month, 39% of homebuilders said they had cut prices – the highest since the coronavirus pandemic.<\/p>\n
At the same time, mortgage rates started to inch down last month, as financial markets priced in expectations for an interest rate cut<\/a> from the US central bank.<\/p>\n Lower borrowing costs contributed to the spike in new home sales, Thomas Ryan, a North America economist at Capital Economics, said in a research note.<\/p>\n The average rate on the 30-year mortgage, the most popular home loan in the US, has fallen even further this month. It dropped to 6.26% last week, according to Freddie Mac, an ongoing decline that could prompt even more new home sales activity in the coming months, Mr Ryan said.<\/p>\n