(CNBC) — Sales of newly built homes are falling, and the culprit is clear. Homebuyers increasingly can't afford what they want. Higher mortgage rates, combined with the loss of homeowner tax breaks in some of the nation's most expensive markets, are taking away buying power.
Sales fell in December, when the new tax law was signed and then again in January, when mortgage rates moved higher. Sales are now at their lowest level since August of last year.
The government's measure of new home sales is based on signed contracts during the month, reflecting the people who are out shopping and signing deals with builders. It is therefore a strong read on current reactions to home affordability. Mortgage rates moved a full quarter of a percentage point higher during January, from below 4 percent to about 4.25 percent. It then took off further from there.
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