As the Federal Reserve gathers for their two-day meeting to decide on potential changes to interest rates, new-home sales may figure into their discussion after a month of minor declines.
The latest data from the Department of Housing and Urban Development (HUD) and the Census Bureau show that new-home sales throughout September fell 0.6% on a monthly basis, clocking in at an annual rate of 676,000.
August’s rate of new-home sales was slightly higher at a revised estimate of 680,000, about 4,000 sales less than HUD’s original report.
“Sales activity in the new home segment has been muted so far through 2026,” Realtor.com® Senior Economist Joel Berner said. “Buyers are reluctant in this environment of elevated mortgage rates, and builders are having to offer lower prices and buyer incentives to entice them.”
While only a slight drop monthly, new-home sales are down 5.3% on an annual basis. September 2025’s annual rate is estimated to be about 714,000.
Sarah Bonnarens, director of economic research at NewHomeSource and Zonda, echoes a similar sentiment to Berner and described buyers’ mindset.
“The new home market was already facing slow buyer demand, and mortgage rates exceeding 7% have only added another psychological hurdle for buyers,” she said. “Three in five builders said slow demand was causing concern in September, and preliminary October results suggest even more are feeling that pressure. And even when the numbers do work, buyers are cautious about making such a big financial commitment.”
In line with sales trends, HUD estimates new home inventory sits at 476,000, or 1% below the previous month’s revised estimate of 481,000 (originally 483,000).
September’s inventory represents a supply of 8.4 months at the current sales rate, according to the report. This is down 1.2% month-over-month but is 2.4% higher than last year’s supply of 8.2 months.
Fall slowdowns are not uncommon in the housing market, but elevated rates and growth in home prices place additional pressure on both builders and buyers.
Prior to the new-home sales report, HUD also reported that housing starts fell 5.2%, with multifamily starts bearing the brunt with a 7.2% decline. The National Association of Home Builders (NAHB) also reports that builder confidence has reached a low not seen since 2012, with the builder confidence index at 29 (out of 100).
“The decline in new home sales is consistent with softer builder sentiment and highlights the continued sensitivity of housing demand to financing costs,” Danushka Nanayakkara-Skillington—NAHB assistant vice president for Forecasting and Analysis—said. “Sustained improvements in mortgage rates and housing affordability would help maintain demand.”
The story so far
Other data also paints a picture of a market in limbo, as above-7% mortgage rates have kept mortgage applications down consecutively for weeks. Consumer sentiment also demonstrates the effect high prices have on the market, as October’s sentiment data is near a 74-year low.
The drop in home sales may be attributed to the increase in the median sales price, which HUD reports was $400,400 in September—or 3.9% greater than August’s price of $395,400—but remains below last year’s median sales price of $416,800.
“Affordability remains a significant hurdle for prospective home buyers,” NAHB Chairman Bill Owens stated. “Builders continue to offer incentives and adjust pricing to attract buyers, but elevated mortgage rates and high home prices are limiting the number of households that can afford to purchase a home.”
The minor decrease in home sales nationally can be broken down by region, with major differences between them.
Only two regions experienced growth in terms of sales. The Northeast had the greatest monthly increase in new-home sales at 28%, or an annual rate of 32,000. Following suit, the West’s new-home sales grew by 21.4% month-over-month to 142,000, but fell by 17.4% from the previous year.
On the other hand, home sales in the Midwest and South fell monthly by 7.3% and 6.6%, respectively. Annually, the two regions also saw declines at 8.2% and 0.7%. The Midwest’s annual rate currently sits at 89,000, while the South’s rate remains the highest of the four regions—but fell to 413,000.
Although data from the Northeast does offer some sign of life for new construction, Berner comments that the data should be taken with a grain of salt.
“Data from the Northeast, by far the smallest region for both new construction and new home sales activity, is quite noisy, so the improvement there should be considered with some caution,” he added. “Overall, the regional splits point to a new home sales slowdown that is geographically widespread.”
While economists await the Fed’s next decision for rates, Berner sees the new-home market as “firmly in buyers’ market territory” despite declines.
“Builders, much like existing home sellers, are being forced to compete for the attention of a dwindling pool of buyers,” he concluded. “Unlike existing home sellers, though, builders can’t afford to keep their inventory off the market until conditions improve. They can and are slowing down on the delivery of new homes, but there are still 111,000 completed homes for sale across the country for which builders are eagerly searching for buyers.”
As 2026 winds down, Bonnarens predicts a subdued end to the year.
“Looking ahead to the final few months of the year, demand is likely to remain subdued as buyers prioritize financial certainty and affordability,” she stated. “Those with more financial flexibility, particularly at the higher end of the market, will remain better positioned to move forward.”
