New home sales soar in July amid supply shortage, but prices drop
Sales of new single-family homes rose in July as an acute shortage of existing homes drove buyers to new units — but prices dropped by nearly 10%.
New home sales shot up 4.4% to a seasonally adjusted annual rate of 714,000 units last month, the Commerce Department said on Wednesday. The sales pace in June was revised ꦫlower to 684,000 units from the previously reported 697,000🍸 units.
Economists polled by Reuters had for▨ecast new home sales, which account for a small share of home sales, would rise to a rate of 705,000 units.
New home sales are counted at the signing of a contract, making them a leading indicat💝or of the housing market. They, however, can be volatile 𒁃on a month-to-month basis. Sales increased 31.5% on a year-on-year basis in July.
The median new house price in July was $436,700, a d🍌rop of 8.7% from a y🥃ear ago.
The inventory of existing homes is near historically low levels as mortgage rates hit the highest levels since 2000, dissuading existing homeꦦowners who are locked into low rates from 🎉putting their homes on the market.
The shortage of existing home inventory, which constitutes the majority of the market, is pushing potential buyers towards new houses and driving a flurry of new construction.
The median home price for existing ;homes increased on an annual basis in August, according tꦦo a report released on Tuesday, as the shortage of properties offset the impact of high 🀅mortgage rates that had dampened demand in prior months.
The overall housing market continues to stabilize, but record-breaking mortgage rates, the renewed house price appreciation, and a𒊎n acute supp🐼ly shortage could complicate that recovery.
Home prices were initially the most sensitive to the Federal Reserve’s interest rate hikes – the central bank has raised rates by 5.25 percentage points since March 2022 – but have stabilized after falling into recession and are still adding significant upward pressure to overall inflation.
New home sales in the Midwest increased 47𒊎.4%, the biggest rise on a monthly basis since September 2010. They also rose 21.5% in the West, a region that has experienced the most significant price declines in the past 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 July’s sales pace, it would take 7.3 months to clear the supply of houses on the market, down from 7.5 months in June.