New home sales fell to the slowest pace in more than six years in July, due to higher mortgage interest rates and lack of inventory.
Sales of new single‐family homes were at a seasonally adjusted annual rate of 511,000, down 12.6% compared with June and down 29.6% compared with July 2021, according to estimates from the U.S. Census Bureau and the Department of Housing and Urban Development.
The median sales price of new home sold in July was $439,400. The average sales price was $546,800.
As of the end of July, there were about 464,000 new homes available for sale in the U.S.
Although inventory is low, demand is way down: That’s about a 10.9-month supply at the current sales rate.
“The disappointing sales pace mirrors an ongoing decline in builder sentiment as elevated mortgage rates and higher construction costs are pushing more consumers out of the market, particularly entry-level buyers,” says Jerry Konter, chairman of the National Association of Home Builders (NAHB), in a statement.
“The sharp drop in new home sales is another clear indicator that housing is in a recession,” adds Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “The combination of higher prices and increased interest rates are generating a notable slowing of the housing market.”
Odeta Kushi, deputy chief economist for First American, points out that of the 464,000 new homes available for sale, “only 45,000 are completed and ready to occupy. The remaining supply of new single-family homes have not started construction or are under construction.”
“By stage of construction, the share of completed homes/ready to occupy inventory in July was 9.7 percent, up from 8.8 percent one year ago,” Kushi says. “While the share of new-home inventory that is under construction increased from 64.6 percent to 67.2 percent. The share of completed homes sold was 28.4 percent, up from 26.3 percent one year ago, but down compared with last month. The share of homes ‘under construction’ sold declined dramatically compared with last month from 45.8 percent in June to 39.3 percent in July.”
“Declining affordability has priced out buyers from the market and economic uncertainty has added to buyer hesitation,” Kushi adds. “In July 2022, only 8 percent of new-home sales were priced below $300,000, compared with 22 percent one year ago. Pre-pandemic, in July 2019, 47 percent new-home sales were priced below $300,000.”
Late last week the National Association of Realtors reported that existing-home sales fell for a sixth consecutive month in July to a seasonally adjusted annual rate of 4.81 million – down 5.9% from June and down 20.2% from July 2021.
