Sales of new single‐family houses fell significantly in June, as rising mortgage rates and declining builder confidence continued to take a toll on the housing market.
According to the monthly report released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development, sales of new homes fell to a seasonally adjusted annual rate of 590,000, down 8.1% from the revised May rate of 642,000. The rate also is 17.4% below the June 2021 estimate of 714,000.
Sales decreased in three of the four regions from a month earlier, and declined in all four regions from June of last year.
Sales in the Midwest increased 42.3% in June from May, while they fell 35.7% in the West, 5.3% in the Northeast and 2% in the South from a month earlier. Year over year, sales fell 37.9% in the Northeast, 32.9% in the West, 22.1% in the Midwest, and 8.7% in the South.
The nationwide decline in sales in June reversed the surprising increase in sales reported in May. Initially, the Census Bureau and HUD had reported that sales of new homes in May had risen 10.7% to a seasonally adjusted annual rate of 696,000, but this month’s revision of the May data shows sales rose just 2.1% to a seasonally adjusted annual rate of 642,000 that month.
Nicole Bachaud, an economist with Zillow, said the June numbers were not a surprise. “A June decline in new home sales was to be expected given recent market shifts and reported slump in homebuilder sentiment,” she said, “but the reported value of 590,000 new home sales in June was way under consensus and in line with the low levels that followed the onset of the pandemic in April 2020.”
Builder confidence in the market for newly built single-family homes posted its seventh straight monthly decline in July, falling 12 points to 55, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index. It marked the lowest HMI reading since May 2020 and the second-largest single-month drop in the history of the HMI, behind only a 42-point drop in April 2020.
In addition to sales, both the median and average sales prices for new homes sold fell in June. The median sales price — meaning that half of the homes sold for more and half for less — was $402,400, down 9.5% from $444,500 in May. The average sales price in June was $456,800, down 11.1% from $514,000 in May.
Due in part to the decline in sales, the inventory of new homes for sale increased in June. The seasonally adjusted estimate of new houses for sale at the end of June was 457,000, representing a supply of 9.3 months at the current sales rate. That was up from 444,000 homes for sale at the end of May, or a 7.7 months’ supply. It was the sixth-consecutive month that inventory has increased.
“After months of racing to put up homes in order to meet the red-hot housing market conditions, builders are suddenly seeing more and more contract cancellations, sellers of existing homes cutting prices, and homes lingering on the market,” Bachaud said. “Buyers, meanwhile, have scaled back their activity amid persistent affordability challenges and rising home-buying costs.”
She said this may just be the beginning of a difficult stretch for the homebuilding industry.
“Decelerations in housing permits and starts activity will put a cap on sales in the near term, and suggests that builders are bracing for a rougher road ahead, even as the housing market remains hungry for more inventory with long-run demand staying put,” Bachaud said.
