Key Takeaways
- Sales of newly built homes fell 4.7% in August from July, as lack of affordability hindered the housing market.
- Homebuilders have been pessimistic about sales recently but believe the outlook could improve in the months ahead.
- Falling mortgage rates, a large selection of homes for sale, and prices comparable with previously-owned homes could all spur sales of newly built houses in the future.
Sales of newly built homes continued to languish in August, though the slump wasn’t as deep as forecasters predicted.
Sales in August fell 4.7%, falling to a seasonally-adjusted annual rate of 716,000 from an upwardly revised rate of 751,000 for July, the Census Bureau said Wednesday.
Despite the slowdown, new homes sold faster than the annual rate of 700,000 forecasters had expected, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal. Sales were also 9.8% higher than the same month last year.
Homebuilders Have Been Pessimistic
Homebuilders have been generally pessimistic about the current state of the housing market these days, according to surveys by the National Association of Home Builders.
Buyers have struggled to afford homes with high price tags. Mortgage rates—while falling in recent months— are still far above the record lows available during the pandemic.
But The Outlook Is Bright For Newly Built Homes
However, the same surveys showed builders believe better days could be ahead, and the Census Bureau report indicated several trends could help spur sales in the future.
The median new home sold for $420,600, slightly above the $416,700 median sale price for previously owned homes in August, according to the National Association of Realtors. And the number of homes for sale rose to a seasonally-adjusted 467,000 from 459,000 in July.
Meanwhile, mortgage rates have fallen more than a percentage point since May, averaging 6.09% last week, according to Freddie Mac, as the Federal Reserve begins a campaign of cutting interest rates.
“The report was a bit of a disappointment, but lower mortgage rates likely have yet to spur sales as expected,” Robert Frick, corporate economist with Navy Federal Credit Union, said in a commentary. “With the large inventory of new homes and prices about equivalent to existing homes, sales should rise despite the median price hovering around $420,000.”