Washington, D.C.—Low existing inventory and solid demand more than offset rising mortgage rates and elevated construction costs to boost new home sales last month, according to the National Association of Home Builders (NAHB).
Sales of newly built, single-family homes in July increased 4.4% to a 714,000 seasonally adjusted annual rate from a downwardly revised reading in June, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in July was up 31.5% from a year ago.
“New home sales were solid in July because of an ongoing housing deficit in the U.S. and a lack of resales stemming from many home owners electing to stay put to preserve their low mortgage rates,” said Alicia Huey, chairman of the NAHB and a custom home builder and developer from Birmingham, Ala. “But builders are still confronting many challenges, including rising mortgage rates, supply chain issues for electrical transformers, a dearth of skilled workers and elevated construction costs.”
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the July reading of 714,000 units is the number of homes that would sell if this pace continued for the next 12 months.
New single-family home inventory in July was 437,000, up 4.8% compared to a year ago. This represents a 7.3 months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced. Of the total home inventory, including both new and resale homes, 31% of homes available for sale are newly built.
The median new home sale price in July was $436,700, down roughly 9% compared to a year ago. Pricing is down both due to builder incentive use and a shift towards building slightly smaller homes.
Regionally, on a year-to-date basis, new home sales are up 5.0% in the Northeast, 1.0% in the Midwest and 3.5% in the South. New home sales are down 8.1% in the affordability-challenged West.
“Despite this monthly uptick, new home sales will likely weaken in August as higher interest rates price out prospective buyers,” said NAHB chief economist, Robert Dietz. “Mortgage rates increased from 6.7% at the start of July to above 7% in August.”