New single-family home sales rose in July as an acute shortage of existing homes drove buyers to new units – but prices fell nearly 10%.
New home sales rose 4.4% last month to a seasonally adjusted annualized rate of 714,000 units, the Commerce Department said on Wednesday. The pace of sales in June has been reduced to 684,000 units from a previously reported 697,000 units.
Economists polled by Reuters had forecast new home sales, which account for only a small fraction of home sales, would rise to 705,000 units.
New house sales are counted when the contract is signed and are therefore a leading indicator for the housing market. However, they can be volatile from month to month. Revenue rose 31.5% year over year in July.
The average new home price in July was $436,700, down 8.7% from a year earlier.
With mortgage rates hitting their highest level since 2000, the inventory of existing homes is near an all-time low, preventing existing homeowners locked into low interest rates from putting their homes on the market.
The lack of existing real estate holdings, which make up the majority of the market, is pushing potential buyers towards new homes and leading to a surge in new construction.
The average house price for existing homes rose annually in August, according to a report released on Tuesday, as housing shortages offset the impact of high mortgage rates, which had dampened demand in previous months.
The overall housing market continues to stabilise, but record-breaking mortgage rates, renewed house price increases and acute supply constraints could complicate this recovery.
House prices were initially most sensitive to Federal Reserve rate hikes – the central bank has hiked rates by 5.25 percentage points since March 2022 – but have stabilized after slipping into recession and still exert significant upward pressure on headline inflation.
New home sales in the Midwest rose 47.4%, the fastest monthly increase since September 2010. They also rose 21.5% in the West, a region that saw the sharpest price declines last year. They fell by 2.9% in the northeast and by 6.3% in the densely populated south.
There were 437,000 new homes on the market at the end of last month, up from 428,000 in June. At the pace of sales in July, it would take 7.3 months to sell off the supply of homes on the market compared to 7.5 months in June.