Sales of new single-family homes plummeted in October to the lowest level in about two years as mortgage rates remained elevated during the month and hurricanes took a toll on housing activity.

New home sales dropped 17.3% in October from the previous month to a seasonally adjusted rate of 610,000 units, according to Census Bureau data released on Tuesday. Analysts surveyed by Bloomberg had expected a pace of 725,000.

"New home sales were much weaker than expected in October, with Hurricanes Helene and Milton taking a much larger toll than anticipated on sales in the South," said Nancy Vanden Houten, lead US economist at Oxford Economics, in a note after the data's release. "We expect sales to rebound from their October pace in the months ahead as rebuilding in the South gets underway."

Sales in the South fell 28% to 339,000 in October, marking the slowest rate of increase since April 2020.

In addition to the hurricanes, buyers dealt with expensive borrowing costs as well as rising home prices. The median sales price of new houses sold was $437,300 in October, up from $426,300 the previous month.

"October's weak sales came alongside increases in mortgage rates throughout the month," Colin Johanson, US macro economic research analyst at Barclays, wrote in a note after the release.

"New home sales are measured at the time of contract signing, so reflect a more current picture of mortgage rates than existing home sales, which are measured at the time of closing."

Mortgage rates continue to march higher, with the average 30-year fixed mortgage rate hovering around 6.8% last week, according to Freddie Mac, compared to the 6.7% a week prior.

Meanwhile, Donald Trump's presidential victory, a steady drumbeat of strong economic data, and sticky inflation readings has made market participants question how quickly the Fed will cut interest rates. On Tuesday, markets were pricing in 40% chance the central bank doesn't cut interest rates at its December meeting, up from 24% a month prior, per the CME FedWatch Tool.

With higher rates, it likely indicates that "the sales level may remain low if rates do not continue to decline during the FOMC's expected rate-cutting cycle through the end of this year," Johanson added.

Homebuilders continue to adapt accordingly. DR Horton (DHI) CEO Paul Romanowski told investors and analysts on the homebuilder's fourth quarter earnings call in late October that the company's executives “expect incentives will have to remain elevated in order to maintain affordability and monthly payments that our buyers are looking for.”