New Home Sales Grew at a Surprising Rate in July

New home sales rose in July as homebuyers were encouraged by lower rates and builder incentives.

Sales of new single-family houses increased by 10.6% from the revised June numbers, rising to an annual rate of 739,000 homes, the Census Bureau said Friday. This was above the 668,000 forecasters surveyed by Dow Jones Newswires and The Wall Street Journal expected.

“New home sales continue to be the lone bright spot in the housing market,” wrote Daniel Vielhabe, economist for Nationwide

By comparison, Thursday’s report on existing home sales showed the slowest growth for any July since 2010.

Why Are Existing Home Sales Doing Well?

Sellers have been reluctant to trade their low mortgage rates for higher current rates, resulting in fewer existing home options for buyers and higher prices. Buyers, therefore, are turning to the new builds.

Builders can offer incentives to help with the costs as high mortgage rates price some out of the market. According to the National Association of Home Builders, 64% of homebuilders used incentives to entice buyers, the highest level since April 2019.

Additionally, mortgage rates decreased in August, hovering near a 16-month low and economists expect them to fall further.

“With current inflation data pointing to interest rate cuts from the Federal Reserve and mortgage rates down markedly in the second week of August, buyer interest and builder sentiment should improve in the months ahead,” said NAHB Chief Economist Robert Dietz.