New home sales drop in August
Sales of new single-family homes declined in August despite a lack of existing inventory on the market.
According to the latest Monthly New Residential Sales report, released this morning by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, new home sales fell 8.7% to a seasonally adjusted annual rate of 675,000. The July rate for new home sales was revised to 739,000.
The latest figure is 5.8% above the August 2022 estimate of 638,000, however.
The National Association of Home Builders pointed to elevated mortgage rates and challenging affordability conditions as the primary culprits behind new home sales slowing down to their weakest rate since March.
“Builders continue to grapple with supply-side concerns in a market with poor levels of housing affordability,” said Alicia Huey, chairman of the NAHB and a custom home builder and developer from Birmingham, Ala. “Higher interest rates price out demand, as seen in August, but also increase the cost of financing for builder and developer loans, adding another hurdle for building.”
At the end of August, the seasonally‐adjusted estimate of new houses for sale was 436,000. This represents a supply of 7.8 months at the current sales rate.
The median price of homes sold in August declined 1.44% to $430,000 compared to the July median price of $436,600. On a year-over-year basis, the median price is down 3.15% compared to a price of $444,300 in August 2022.
But the average price rose by 1.2% to $514,000 from an average price of $507,900 in July. Compared to a year ago, the average price is down 3.15%.
“Sales weakened in August with average mortgage rates above 7%,” said NAHB Chief Economist Robert Dietz. “While some builders were able to offset that effect via mortgage rate buydowns, rates moved higher this month, suggesting the pace of new home sales will weaken further for September.”
Here’s how new home sales performed in August on a regional basis:
- In the Northeast, sales increased 6.7% on a month-over-month basis and jumped 18.5% on a year-over-year basis.
- In the Midwest, sales decreased 17.2% compared to July but ascended by 24.2% compared to August 2022.
- Sales in the South are down 7.5% for the month and fell 9.2% compared to a year ago.
- In the West, sales edged ahead by 1.2% but are down 5.2% from the August 2022 rate.
