Low existing inventory and solid demand more than offset rising mortgage rates and elevated construction costs to boost new home sales last month.
Sales of newly built, single-family homes in July increased 4.4% to a 714,000 seasonally adjusted annual rate from a downwardly revised reading in June, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in July was up 31.5% from a year ago.
New home sales were solid in July because of an ongoing housing deficit in the U.S. and a lack of resales stemming from many home owners electing to stay put to preserve their low mortgage rates. However, despite this monthly uptick, new home sales will likely weaken in August as higher interest rates price out prospective buyers. Mortgage rates increased from 6.7% at the start of July to above 7% in August.
New single-family home inventory in July was 437,000, up 4.8% compared to a year ago. This represents a 7.3 months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced. Of the total home inventory, including both new and resale homes, 31% of homes available for sale are newly built. 17% of new home inventory was completed ready-to-occupy homes. This is up from approximately 9% from a year ago.
The median new home sale price in July was $436,700, down roughly 9% compared to a year ago. Pricing is down both due to builder incentive use and a shift towards building slightly smaller homes.
Regionally, on a year-to-date basis, new home sales are up 5.0% in the Northeast, 1.0% in the Midwest and 3.5% in the South. New home sales are down 8.1% in the affordability-challenged West.