New home sales fell in August as buyers waited for lower rates

US new home sales retreated in August after a sharp rise the previous month as buyers remained patient amid steadily falling mortgage rates.

Sales of new single-family homes fell 4.7% to 716,000 on an annual basis last month, after rising at the fastest pace since early 2022, government data showed Wednesday. The median estimate in a Bloomberg survey of economists called for a pace of 700,000.

The average sales price, meanwhile, fell 4.6% from a year earlier to $420,600. That was the seventh consecutive month of year-over-year price declines, extending the already longest streak since 2009. It mainly reflected fewer sales of homes priced above $500,000.

Despite the decline in sales, sentiment on the housing market is increasing. Mortgage rates are at their lowest level in two years, driven by expectations of a series of rate cuts by the Federal Reserve.

That has boosted morale among both consumers and homebuilders, whose prospects for future sales turned positive this month for the first time since May, according to a industry research. And shares of construction-related stocks traded near all-time highs.

Mortgage rates have fallen for eight weeks in a row, the longest period of decline since 2018-2019. bigger question for the purchase of a house, according to data from the Association of Mortgage Bankers. Meanwhile, the share of consumers planning to buy a home in the next six months rose to the highest level in a year in September, according to a Conference Board survey.

Falling financing costs should alleviate some of the affordability issues facing the housing sector. Builders including Lennar Corp. have fueled demand by heavily pushing sales incentives, such as lowering mortgage rates, but this has partly come at the expense of gross profit margins, Bloomberg Intelligence analyst Drew Reading said in a Sept. 20 note.

Builders made notable progress in selling their inventory in August, with the number of homes sold reaching the second-highest level since late 2006. However, inventory is still robust with 467,000 homes for sale, nearly the highest since the puffy days. of the Great Recession.

“These healthy supply levels should help maintain momentum for new sales through the remainder of 2024, especially as homebuyer interest is fueled by falling mortgage rates,” Nationwide senior economist Ben Ayers said in a note.

Sales fell in three of the four regions, mainly in the Northeast and West. Contract signings in the South, the largest U.S. region, rose to 459,000 annually, marking the fastest pace since late 2021.

Sales of new homes are seen as a more timely measurement than purchases of previously owned homes, which are calculated when contracts close. However, the data is volatile. The government report found that 90% believed the change in new home sales ranged from a fall of 15.3% to an increase of 5.9%.