Sales of new single-family homes posted a small gain in July, increasing 1.0 percent to 708,000 at a seasonally-adjusted annual rate from a 701,000 pace in June. Despite the gain, sales are down 27.2 percent from the year-ago level and are 28.7 percent below the 993,000 pace in January (see top of first chart). The declining trend in new home sales is putting downward pressure on permits for future construction (see top of first chart).
Sales of new single-family homes were down in two of the four regions of the country in July. Sales in the South, the largest by volume, rose 1.3 percent while sales in the West gained 14.45 percent. Sales in the Northeast were down 24.1 percent while sales in the Midwest were off 20.2 percent for the month. From a year ago, sales were down in all four regions.
The total inventory of new single-family homes for sale rose 5.5 percent to 367,000 in July, the highest level since October 2008 (see bottom of first chart), leaving the months’ supply (inventory times 12 divided by the annual selling rate) at 6.2, up 3.3 percent from June and 72.2 percent above the year-ago level (see bottom of first chart). The median time on the market for a new home fell in July, coming in at 3.5 months versus 4.0 in June.
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 around 2.90 percent in July. The average rate is up from a low of 2.65 in January but lower than the 3.18 percent in April 2021. The average rate was as high as 4.94 in November 2018 (see second chart).
The median sales price of a new single-family home was $390,500 (see second chart), up 5.5 percent from June (not seasonally adjusted). The gain from a year ago is 18.4 percent. On a 12-month average basis, the median single-family home price is at a record high (see second chart).
Record-high prices and somewhat higher mortgage rates are forcing some buyers out of the market and contributing to a slowing in housing activity. Furthermore, the recent surge in new Covid cases may be stalling the return to pre-pandemic housing preferences. It is likely that these conditions will continue to impact the overall housing market, and on balance, further reduce demand, leading to looser supply conditions and slower future price increases.