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New home sales jump by over 28% in August

Yahoo Finance Live anchors Seana Smith, Dave Briggs, and Rachelle Akuffo discuss the newly released August housing data, which found new home sales jumped last month.

Video transcript

DAVE BRIGGS: Rachelle, more now on the housing market. Mortgage rates, as we mentioned there, continue to climb, headed towards 7% on the 30-year, more than doubling from a year ago. Inventory remains low. Prices are cooling across the country. Contracts are being canceled and projects stalling. And then, surprise, new home sales today shooting right back up, jumping 28% in August. That's according to the Department of Housing and Urban Development. 685,000 new homes were sold just last month.

Seana, the dynamic overall has not changed in the number of months. We will continue to see exceptions, bounces here or there, but overall, the Fed is determined to win this fight. And we saw housing begin to struggle before any other portion of this economy. And we're going to see that falling off in prices across the country with notable exceptions, Miami coming up later in the show. They will win this fight.

And the problem is these mortgage rates are keeping sellers and buyers on the sideline because as we argued with Bill Smead, you're not going to upgrade to a bigger home if you're going to pay double your mortgage rate right now. You're just not going to do it. And you're also not going to sell right now because of that.

SEANA SMITH: Exactly, and also, if you're a first-time homebuyer, you now have a less likelihood of being able to afford a home with a mortgage rate now nearly double what it was during the pandemic. So comparatively speaking, obviously, the housing market here showing signs that it is slowing. The new home sales numbers stuck out to me.

Yes, you can take a look at that number, 29% jump. Yeah, we have seen some commentary, a number of economists weighing in on this. Greg Daco of EY-Parthenon-- he was on the show yesterday-- he tweeted out this morning that this number was likely a head fake because you also have to keep in mind those inventory levels. Simply, homebuilders are not building the number of homes that are needed right now in order to really help with supply.

You also have the fact that sellers aren't selling because of that higher mortgage rate that you were just talking about. Zillow was out with a report saying that new listings dropping nearly 23% in August from a year ago. So Rachelle, it's hard-- I mean, I don't think there's any argument to the fact that, yes, the housing market is slowing, but obviously, the degree of this slowing and what we could potentially see over the coming months is what people are debating right now.

RACHELLE AKUFFO: I mean, and it's tough, though, because as we see, mortgage rates, when you compare them to where they were, say, in the '90s, obviously, compared to back then, things would look pretty good. But you have to remember, we were in a place where we had historically low mortgage rates for a very long time. And even over the course of the pandemic, when you look at the size of the millennial population, households have grown. The size of them have grown.

So they do still have a need to get into a place. Rents are still too unaffordable. So there is that need. They do have a need for these things. So it's interesting to see them, though, a lot of these lumber, these home builders saying, look, it's not worth for us to do it right now if some of these people just want to stay on the sidelines.

But a certain point, as we're seeing, though, once we saw some of this-- the frothiness, we saw people sort of waiving everything, waiving every contingency with houses. Now that we're not seeing that as much, perhaps we might start to see people trying to come back into the housing market for the first time.

DAVE BRIGGS: Yeah, the people that you are hearing from right now are those that bought at that massive peak in the pandemic. Those are people who are worried, who are inevitably going to lose 20% to 30% of their value because they bought at ridiculous rates.

Now, those that want to say this is like 2008, 2009, 2012, nothing like it. We're not built on a house of cards like we were back then with those types of loans being thrown out. And the bottom line is, the inventory, though it's coming up, is still historically low. So these prices don't have very far to fall.

SEANA SMITH: Yeah, and it's also interesting, just looking at some of this data in terms of home buyers backing out, too, like, that's another dynamic that's playing out right now, especially in some of these Sun Belt cities. And these were the cities that attracted so many people, so many new homeowners during the pandemic boom.

The fallout that we've seen there, Jacksonville, Florida, 26% of buyers backed out of contracts in August. Las Vegas, 23%. Atlanta, nearly 23%. Orlando, Florida, which you are just back from, nearly 22% of buyers backing out of these contracts. So as we start to see potentially that picking up as well, obviously, this could really spell much more trouble here for the housing sector at large.

RACHELLE AKUFFO: And you certainly-- you bit off more than you can chew when you signed up for this before the rate hike rising period kicked in. So a tough spot for homeowners and those prospective buyers right now.