Sales of new homes increased 10.6% in July to a seasonally adjusted rate of 739,000 units, up from June’s revised seasonally adjusted annual rate of 668,000, according to the Census Bureau on Friday. Those figures exceeded Bloomberg consensus expectations for sales to reach a 623,000 unit pace.
The uptick in sales activity likely reflects how lower rates have incentivized many builders to provide more attractive rates for house hunters who may finally see some relief from affordability challenges that have plagued the housing market for the better part of two years.
In recent weeks, 30-year mortgage rates have dropped below 7% and are now at the lowest level since May 2023. Still, they remain double levels from three years ago.
“That is a tool that these [builders] have in their toolbox that the existing home market cannot compete with, and frankly, the smaller private builders can’t compete with either,” UBS US homebuilders & building products equity research analyst John Lovallo recently told Yahoo Finance.
Still, some buyers are waiting for rates to come down even further.
Applications to purchase a home decreased 5% last week, marking the lowest level since February, per data from Mortgage Bankers Association (MBA) released Wednesday.
In the meantime, builders have continued to add more supply, with inventory reaching 462,000 homes in July. At the current sales pace, it would take seven and a half months to sell through this inventory. A six-month sales pace represents a balanced market.
With rates coming down, however, home prices remain sticky, with the median sales price for a new home rising to $429,800 in July from $416,700 the month prior.
