In a further sign that the housing market continues to weaken, new home sales in July fell to their lowest level since January 2016. The tepid sales pace matches declining builder confidence since the beginning of the year as the industry grapples with supply chain disruptions that are delaying new home building projects and raising housing costs as mortgage interest rates increased.
Sales of newly built, single-family homes in July fell 12.6% to a 511,000 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. New home sales are down 29.6% from a year ago.
“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,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Ga.
“The sharp drop in new home sales is another clear indicator that housing is in a recession,” said 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.”
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 511,000 units is the number of homes that would sell if this pace continued for the next 12 months.
New single-family home inventory remained elevated at a 10.9 months’ supply, up 81.7% over last year, with 464,000 available for sale. However, only 45,000 of the new home inventory is completed and ready to occupy. The remaining have not started construction or are currently under construction.
The median sales price rose to $439,400 in July, up 5.9% compared to June, and is up 8.2% compared to a year ago.
Regionally, on a year-to-date basis, new home sales fell in all four regions, down 14.9% in the Northeast, 26.5% in the Midwest, 13.4% in the South and 15.7% in the West.