Posted July 26, 2024

New Home Sales Soft in June as Mortgage Rates Remain Near 7%

Elevated mortgage rates continue to keep buyers on hold, as new home sales remained relatively flat in June.

Sales of newly built, single-family homes in June fell 0.6% to a 617,000 seasonally adjusted annual rate from a slight upwardly revised reading in May, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The pace of new home sales in June is down 7.4% from a year earlier and is the lowest pace since November 2023.

“Many potential buyers are remaining in a holding pattern due to elevated mortgage rates that averaged near 7% in June,” said Carl Harris, chairperson of the National Association of Home Builders (NAHB). “However, moderating inflation suggests lower interest rates in the months ahead and that should bring more buyers off the sidelines.”

A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction, or completed.

In addition to adjusting for seasonal effects, the June reading of 617,000 units is the number of homes that would sell if this pace continued for the next 12 months. That is 0.6% below the revised May rate of 621,000 and 7.4% below the June 2023 estimate of 666,000.

“Though new home inventory in June remained elevated at a 9.3 months’ supply at the current building pace, there is still a long-run need for more construction because existing inventory remains relatively low,” said Jing Fu, NAHB director of forecasting and analysis. “Due to a lack of resale homes for sale, the combined inventory for new and existing single-family homes remains lean at a 4.7 months’ supply, according to NAHB estimates.”

The new single-family home inventory in June remained elevated at a level of 476,000, up 11.2% compared to a year earlier. This represents a 9.3 months supply at the current building pace, which has been supported by the ongoing shortage of resale homes.

Of the new home inventory, 102,000 are completed ready-to-occupy homes, up 50% year over year. This segment represents 21% of the total inventory.

On a regional basis, new home sales are down 5.5% in the Northeast and 6.7% in the South year over year. However, new home sales are up 25.5% in the Midwest and 5.7% in the West.

The median home sale new home price was up 2.5% compared to last month at $417,300. The price remained essentially flat compared to last year. The average sales price was $487,200.

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