Home sales continued to plunge in July, falling nearly 30% from a year earlier to the slowest pace in six years, according to the latest report.
Sales of new single‐family houses in July were at a seasonally adjusted annual rate of 511,000, down 12.6% from the revised June estimate of 585,00 and down 29.6% from a year earlier, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
The pace of sales peaked in August 2020 at 1.04 million, and is now at its slowest pace since 2016.
Sales were down year over year in all four regions, including more than 50% in the West. Sales were also down from June in three of the four regions, rising in only the Northeast.
By region, sales of new homes fell from June in the Midwest (-20.6%), the West (-13.3%) and the South (-12.1%), but increased in the Northeast (13.3%). Year over year, sales fell 50.3% in the West, 37% in the Northeast, 22.9% in the Midwest, and 20.8% in the South.
The decline in sales of new homes comes as housing prices continue to soar. The median sales price – meaning half of homes sold for more and half for less – jumped to $439,000, up $24,500 or 6% from June’s median of $414,900, and up 8% from a year earlier.
The inventory of new homes for sale also increased in July, both from the previous month and from last year, due to shrinking housing affordability as prices and mortgage rates rise.
The seasonally adjusted estimate of new houses for sale at the end of July was 464,000, representing a 10.9-month supply at the current sales rate, the report states. The inventory was up 3.1% from June and 28.2% from July of last year.
Analysts, however, say the 10.9-month supply is a mirage.
In a post on Twitter, Renaissance Macro Research said the number “sounds high, but less than 10% of these listed homes are actually completed.”
First American Deputy Chief Economist Odeta Kushi agreed. “Only 45,000 are completed and ready to occupy,” she said. “The remaining supply of new single-family homes have not started construction or are under construction.”
She continued, “By stage of construction, the share of completed homes/ready to occupy inventory in July was 9.7%, up from 8.8% one year ago.”
She noted that the share of new-home inventory that is under construction also increased, from 64.6% to 67.2%.
“The share of completed homes sold was 28.4%, up from 26.3% one year ago, but down compared with last month,” Kushi said. “The share of homes 'under construction' that sold declined dramatically compared with last month from 45.8% in June to 39.3% in July.”
Kushi said affordability continues to be a major problem.
"Declining affordability has priced out buyers from the market, and economic uncertainty has added to buyer hesitation,” she said. “In July 2022, only 8% of new-home sales were priced below $300,000, compared with 22% one year ago. Pre-pandemic, in July 2019, 47% new-home sales were priced below $300,000.”
That, combined with the inventory issues, is hurting the housing market, she said.
“There remains a structural and long-term shortage in the housing market, but higher rates and development costs have taken their toll on affordability and reduced demand,” Kushi said. “The new-home market is very interest rate sensitive, but new-home sales make up a small share of total sales, approximately 10%.”
