July 26, 2021 Reading Time: 2 minutes

Sales of new single-family homes fell sharply again in June, decreasing 6.6 percent to 676,000 at a seasonally-adjusted annual rate from a 724,000 pace in May. That drop follows a 7.8 percent decrease in May and a 10.1 percent fall in April. Sales are down 19.4 percent from the year-ago level and are 31.9 percent below the 993,000 pace in January (see top of first chart). However, sales are also about inline with the 677,000 pace from August 2019 (see top of first chart).

Sales of new single-family homes were down in three of the four regions of the country in June with the South, the largest by volume, off 7.8 percent, the West off 5.1 percent, and the Northeast down 27.9 percent. Sales in the Midwest were up 5.7 percent for the month. From a year ago, sales followed a similar pattern: sales were lower by 24.8 percent in the South, off 12.7 percent in the West, and down 40.4 percent in the Northeast.  Sales in the Midwest were up 7.0 percent from a year ago.

The total inventory of new single-family homes for sale rose 7.0 percent to 353,000 in June, the highest level since December 2008,  leaving the months’ supply (inventory times 12 divided by the annual selling rate) at 6.3, up 14.5 percent from May and 46.5 percent above the year-ago level (see bottom of first chart). The median time on the market for a new home fell in June, coming in at 3.5 months versus 4.4 in May.

Recent headwinds for the housing market include somewhat higher mortgage rates and sharply higher home prices. The average rate of a 30-year fixed-rate conforming mortgage was 2.98 percent in June, up from 2.96 in May. The average rate is up from a low of 2.68 in December but lower than the 3.08 percent in March 2021. The average rate was as high as 4.87 in November 2018 (see second chart).

The median sales price of a new single-family home was $361,800 (see second chart), down 5.0 percent from the record high in May. The gain from a year ago is 6.1 percent. On a 12-month average basis, the median single-family home price is at a record high (see second chart).

The combination of high prices and somewhat higher mortgage rates is forcing some buyers out of the market and contributing to a slowing in housing activity. It is likely that these conditions will continue to significantly impact the overall housing market, further reducing demand, easing the tight supply, and slowing future price increases.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.

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