August Sees a Dip in U.S. New-Home Sales Amid Elevated Interest Rates and Prices
In August, the U.S. housing market witnessed a decline in the sale of newly constructed homes, a trend primarily influenced by the persistently high interest rates and escalating home prices, which curtailed buyer demand.
According to data released by the Commerce Department on Tuesday, U.S. new-home sales recorded an 8.7% drop, with an annual rate of 675,000 in August, compared to a revised figure of 739,000 in the previous month. It is important to note that this number is seasonally adjusted and represents the hypothetical volume of homes that would be constructed over a year if builders maintained the same pace consistently each month.
This reduction in new-home sales fell short of expectations on Wall Street, where economists had anticipated a total of 695,000 sales in August. A notable contributor to this decline was a substantial drop in the Midwest region.
It’s worth mentioning that the data for July underwent significant revisions, with new-home sales climbing to a revised 739,000 in July, in contrast to the initial estimate, which indicated a 4.4% increase.
The statistics related to new-home sales are characterized by month-to-month volatility and frequent revisions.
The median sales price of new homes in August decreased to $430,300, down from $436,700 in the preceding month. Simultaneously, the supply of new homes available for purchase increased by 11.4% between July and August, resulting in a 7.8-month supply.
On a regional basis, the Northeast outperformed other areas in terms of new home sales, posting a 6.7% increase. Conversely, the rest of the United States saw declines in new-home sales, with the sharpest drop recorded in the Midwest, down by 17.2%.
While new home sales are up by 5.8% compared to the previous year, concerns have emerged among homebuilders in recent months. Despite benefiting from a shortage of resale inventory, they have become increasingly uncertain about their prospects, particularly in light of high mortgage rates and tighter credit conditions. Builder confidence, as reflected in confidence surveys, reached a five-month low in September. Notably, the 30-year mortgage rate stood at 7.51% as of the latest data, and it continues to inch upward, as reported by Mortgage News Daily.
Giampiero Fuentes, an economist at Raymond James, noted, “New home sales are probably starting to react to the recent further increase in mortgage rates which will probably help push new home sales prices lower in the coming months.” He also observed a gradual increase in home inventory levels.