Lower mortgage rates support steady new home sales

After a long delay caused by the government shutdown, we finally have a new home sales report for October! The report shows that lower mortgage rates, which are now moving toward 6%, are helping to keep new home sales steady, similar to what we see in the existing home sales market. New home sales are still at 2019 levels today, which means they’re not as depressed as the existing home sales market. So, the fact that they have been able to maintain elevated sales shows how effective the mortgage buy-down program has been for the builders.

From Census:

New home sales: Sales of new single-family houses in October 2025 were at a seasonally-adjusted annual rate of 737,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.1 percent (±14.2 percent)* below the September 2025 rate of 738,000, and is 18.7 percent (±21.7 percent)* above the October 2024 rate of 621,000.

There were some negative revisions to the past three months, but the trend still stayed positive. We are at a multiyear high in sales levels today and rates are lower now than when this report came out. As you can see in the chart below, we have been in a small channel of sales levels for some time now. When rates rise, sales take a small hit; when they fall, demand firms up.

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For sale inventory and months’ supply: The seasonally-adjusted estimate of new houses for sale at the end of October 2025 was 488,000. This is virtually unchanged from the September 2025 estimate of 488,000, and is 1.7 percent (±5.8 percent)* above the October 2024 estimate of 480,000. This represents a supply of 7.9 months at the current sales rate. The months’ supply is virtually unchanged from the September 2025 estimate of 7.9 months, and is 15.1 percent (±15.3 percent)* below the October 2024 estimate of 9.3 months.

The monthly supply data has been declining from peak levels in recent years, but I prefer to focus on completed units for sale; builders aren’t the March of Dimes. So housing permits have recently increased, but they are still far from the levels needed to truly believe in a construction growth cycle.

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As you can see in the chart below, builders tend to become very cautious when completed units sold reach around 120,000.

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Conclusion

We are still catching up on the new home sales report, but one thing we know for today: mortgage rates are near 6% and not over 7%, like they were a year ago, so the mortgage rate environment is much better. Builders had been using their profit margins to help sell homes, but that is too costly for them when rates are above 7%. As you can see, they made some progress last year.

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Now, with lower mortgage rates and the government focused on boosting housing, it should be a better year for builders to clear some of their excess supply.