Sales of new U.S. single-family homes plunged in August as the 30-year mortgage rate rose past 7%, thereby discouraging would-be buyers. According to data from the Commerce Department on Tuesday, new home sales declined by 8.7% to a seasonally adjusted rate of 675,000 units, compared to July’s revised figure of 739,000 units, up from 714,000 units.
The 30-year mortgage rate jumped to an average of 7.19% last week; its highest level since July 2001 according to data from mortgage finance agency Freddie Mac. Mortgage rates have been increasing on the back of concerns that rising oil prices could sever the Federal Reserve’s fight to combat inflation.
While the central bank decided to leave interest rates unchanged in the region of 5.25%-5.50% at its September meeting, bets are on that the Fed will likely implement another interest rate hike before the end of the year.