Sales of newly built, single-family homes fell 0.6% in June to a seasonally adjusted annual rate of 617,000, according to newly released data from the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau.
A lack of affordability driven by elevated mortgage rates continue to keep buyers on hold. “However, moderating inflation suggests lower interest rates in the months ahead and that should bring more buyers off the sidelines,” said Carl Harris, chairman of the National Association of Home Builders (NAHB).
The pace of new home sales in June declined 7.4% from a year earlier — the lowest pace since November 2023. The median new home price was $417,300, up 2.5% compared to last month, and essentially flat compared to last year.
Comparing last year’s new home sales volume to this year’s, “I do not see any ‘slowing,’” says Division Manager for Nation One Mortgage Corporation's southeast division, Phil Crescenzo, Jr. Rather, the market overall is strained for most buyers, which can create "emotional fatigue and slow decisions,” he explained. In the market for new homes, “I have seen an extended period of ‘flatness’, without any significant positive or negative changes, just a longer duration of the same.”
For buyers in the Charleston, S.C., area that Crescenzo’s team serves, “affordability is a challenge for most due to other factors aside from housing. Overall budgets are pressured with inflation so if there is not a reason to jump, this leaves some on the fence.” In response, builders are offering “more incentives, more aggressive price reductions, and inventory is still moving.”
New single-family home inventory in June remained elevated at a level of 476,000, up 11.2% compared to a year earlier. This represents a 9.3-month supply at the current building pace, which has been supported by the ongoing shortage of resale homes.
Michael Iorio, senior vice president of strategic partnerships at Cornerstone Home Lending, which partners with builders nationwide, says many U.S. markets they serve face affordability challenges "due to current mortgage rates and rising insurance and utility costs." Besides sales incentives such as reduced interest rates and temporary buydowns, Iorio's builder partners "are expanding their pool of eligible buyers by working with mortgage professionals to educate Sales Associates on lower down payment mortgage programs."
A new home sale occurs when a sales contract is signed, or a deposit is accepted. That home can be in any stage of construction: not yet started, under construction, or completed. June’s reading is the number of homes that would sell if that pace continued for the next 12 months.
The local and national builders that Crescenzo works with “track permitting and starts far more diligently than sales,” he said. “I’ve seen that builders and their analysts will be way ahead of trends in most cases. So, there is no overall concern yet or any slowdown.”
Rather, the lack of rate reductions at the Federal Reserve’s meeting in March — a cut that many builders were banking on — has led to what Crescenzo calls “a re-positioning and different strategy going on currently for the second half the year.”
Of all new home inventory, 102,000 are completed ready-to-occupy homes, up 50% year over year. This segment represents 21% of total inventory.
Major Singleton, a mortgage broker with Edge Home Finance Corporation who partners with builders in Texas’s Dallas-Fort Worth market, also says sales of newly constructed homes are more consistent in his market than the NAHB’s report suggests.
“I think we’re actually seeing a bump in the DFW market on new home sales,” Singleton says. Regionally, on a year-to-date basis, new home sales are down 5.5% in the Northeast and 6.7% in the South. However, new home sales are up 25.5% in the Midwest and 5.7% in the West.
“There are people that are sitting on the sideline,” he acknowledges, but, “in this market, people are flocking to the new builds because of the incentives being offered by the new builds,” like interest rate buydowns and reduced closing costs.
Despite new home inventory remaining elevated in June, “there is still a long-run need for more construction because existing inventory remains relatively low,” said Jing Fu, NAHB director of forecasting and analysis. “Due to a lack of resale homes for sale, the combined inventory for new and existing single-family homes remains lean at a 4.7 months’ supply.”
