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WASHINGTON: New home sales in the US dipped in September, official data showed Wednesday, as worsening affordability nudges ownership further out of reach for many.

Sales soared during the coronavirus pandemic as Americans snapped up homes on the back of bargain mortgage rates, but the sector has cooled with the US Federal Reserve hiking lending rates as it fights to bring down surging inflation.

Mortgage rates have climbed in the past year and taken a toll on potential homebuyers, with the average for a 30-year loan hitting its highest in over a decade.

US home price growth slows in August, surveys show

In September, sales of new single-family houses fell 10.9 percent from August to a seasonally adjusted annual rate of 603,000, the Commerce Department said.

The median sales price for a new home rose however to $470,600, up by more than $34,000 from August’s revised figures.

Prices have been supported recently by low levels of existing home inventory, pushing buyers into new homes, said Ian Shepherdson of Pantheon Macroeconomics in an analysis this week.

But while sales of new homes rose in August to the highest rate since early this year, analysts expected the gain to be short-lived given a drop in mortgage purchase applications and increasing mortgage rates.

The leap in August could be inaccurate given margins of error in data, or it could be “unsustainable, if it reflects a rush of purchases by people who locked-in rates as they began to surge again,” said Shepherdson.

US mortgage interest rates reach 6.25%, highest level since October 2008

“We expect both new and existing home prices to fall sharply over the next year,” he said, pointing to growing inventory levels.

The latest down trend in the small new home segment reflects that in the larger existing home sales market, which made an eighth straight monthly decline last month according to industry data.

With inflation still persistently high, observers widely expect the Fed to deliver a further rate hike at an officials’ policy meeting next week.

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