New home sales plunged in June as higher mortgage rates and lack of affordability dampened buyer demand. In addition, production slowed on lower builder confidence.
New home sales were at a seasonally adjusted annual rate of 590,000, a decrease of 8.1% compared with May and down 17.4% compared with June 2021, according to estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
The median sales price for a new home sold in June was $402,400.
The average sales price was $456,800 – a record high.
Regionally, on a year-to-date basis, new home sales fell 12.1% in the Northeast, 24.8% in the Midwest, 12.6% in the South and 9.6% in the West.
Lack of inventory has helped contribute to rising home prices – thus eroding affordability.
Builders have struggled to keep pace with demand due to lack of skilled labor and supply chain constraints.
As of the end of the month, there were about 457,000 new homes available for sale in the U.S. That’s about a 9.3-month supply at the current sales rate.
“Builders saw sales decline significantly as buyers were priced out of the market on higher interest rates and ongoing home building and development costs, including building materials,” says Jerry Konter, chairman of the National Association of Home Builders (NAHB), in a statement. “This is just the second time that new home sales have fallen below a 600,000 annual pace since Oct. 2018, and this latest report also mirrors a sharp decline in builder confidence as noted in our latest survey.”
“Buyers are balking due to deteriorating affordability conditions and growing sticker shock,” adds Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis for NAHB. “Only 14 percent of new home sales in June were priced below $300,000. A year ago, it was 27 percent. Meanwhile, inventory levels are elevated and will contribute to near-term production declines as the market finds a new balance.”
