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Sales of newly built homes were pushed to their lowest point since March by elevated mortgage rates and poor affordability conditions, new data shows.
New-home sales plummeted 8.7 percent in August to a seasonally adjusted annual rate of 675,000. Despite the steep decrease, sales remained up 5.8 percent from a year ago, according to the United States Census Bureau.
Newly built homes have emerged as a popular alternative for homebuyers with means as existing home inventory remains scarce amid high mortgage rates, but the sector is not immune to the affordability woes facing the housing market, with mortgage rates now north of 7 percent and homebuilders struggling with supply chain issues.
“Sales weakened in August with average mortgage rates above 7 percent,” said National Association of Home Builders Chief Economist Robert Dietz. “While some builders were able to offset that effect via mortgage rate buydowns, rates moved higher this month, suggesting the pace of new home sales will weaken further for September.”
The median sale price for newly built homes was $430,000 — down 2 percent from a year ago — while the average price was $514,000, according to the Census Bureau. The seasonally adjusted estimate of new homes for sale at the end of August was 436,000, representing a supply of 7.8 months at the current sales rate — down 5.2 percent compared to a year ago.
Of the total inventory of homes for sale, including both new and existing, newly built homes represented 31 percent of those homes for sale in August, and represented 16 percent of total home sales during the month.
“Builders are being more cautious about managing their inventory in this rising rate environment,” Dietz noted. “A year ago, 10 percent of the new home inventory listed for sale consisted of homes that had not yet started construction, and that share has now risen to 17 percent of the total inventory.”
Regionally, new-home sales were up 4.8 percent in the Northeast, 4.4 percent in the Midwest and 1.9 percent in the South. Sales were down 0.5 percent in the West.
