US new home sales bounced back to their highest level since May 2023, with buyers benefiting
Contracts for new single-family homes rose 10.6% last month to 739,000 on an annual basis, reflecting gains in all four major regions, government data showed Friday. The pace exceeded all estimates in a Bloomberg survey of economists.
The pick-up in sales signals that the combination of lower mortgage rates and generous sales incentives by builders is starting to take root. Potential buyers are finding more options in the new home market as the supply of existing homes is still very limited. Asking prices are also more competitive compared to the resale market.
Mortgage rates have fallen to 6.5% from a peak of nearly 7.3% in April in 2024, and are expected to fall further as the Federal Reserve prepares to cut rates next month. Chairman Jerome Powell said Friday at the central bank’s annual symposium in Jackson Hole, Wyoming, that “the time has come” to cut interest rates.
The rebound in sales allowed builders to make a dent in inventory last month, which fell to the lowest level since the start of the year. Nevertheless, the number of homes for sale is still almost the highest since 2008.
At the current sales pace, that represents 7.5 months of supply, the lowest level since September but above pre-pandemic levels. Increased inventory helps keep prices in check: The average sales price of a new home in July fell 1.4% to $429,800 from a year ago. With the exception of one month, prices have fallen year-on-year this year.
Although inventory is slowly increasing in the resale market as some homeowners say goodbye to their pandemic-era low mortgage rates, that supply is still historically low and homes remain expensive. The average price of previously owned homes was a
Despite weaker sales in the sector recently, the nation’s largest homebuilders have posted strong profits, luring buyers by lowering prices and lowering customers’ mortgage rates.
The shares of Toll Brothers Inc. rose earlier this week after the luxury builder reported that deliveries will take place
By region, sales in the West increased at the fastest pace since February 2022. Contracts in the Midwest were the strongest in three years.
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 5.9% to an increase of 27.1%.