Buyers hesitant to commit as mortgage rates hover near 7%
New home sales remained sluggish in June as potential buyers stayed on the sidelines, waiting for mortgage rates to fall further.
The number of newly constructed single-family homes sold fell 0.6% month over month to a seasonally adjusted annual rate of 617,000, according to data released by the Department of Housing and Urban Development and the Census Bureau. This pace marks a 7.4% decrease from the same period last year, making it the lowest since November 2023
“Home builders are pricing homes to sell, but they’re finding fewer buyers,” said NerdWallet home expert Holden Lewis. “The problem is that high mortgage rates continue to make it hard for people to afford monthly payments on new homes.”
Lewis noted that, in June, 46% of new homes sold for less than $400,000, compared to 43% in all of 2023, indicating builders’ efforts to appeal to buyers by constructing smaller, less expensive homes.
“Builders are trying to appeal to buyers by constructing smaller, closer-together and less-expensive homes,” he said. “But with mortgage rates averaging just under 7% in June, buyers struggled with affordability. Mortgage rates have fallen in July, and we might see an uptick in new home sales in the July report.”
Carl Harris, chairman of the National Association of Home Builders (NAHB), echoed Lewis’ sentiments.
“Many potential buyers are remaining in a holding pattern due to elevated mortgage rates that averaged near 7% in June,” Harris said. “However, moderating inflation suggests lower interest rates in the months ahead and that should bring more buyers off the sidelines.”
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New home inventory in June remained high, with a 9.3 months’ supply at the current building pace, driven by a shortage of resale homes.
“Though new home inventory in June remained elevated at a 9.3 months’ supply at the current building pace, 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, according to NAHB estimates.”
The total inventory of new single-family homes stood at 476,000, up 11.2% from a year earlier. Of this, 102,000 are completed and ready-to-occupy homes, representing a 50% increase year over year and 21% of the total inventory.
The median new home price was reported at $417,300, up 2.5% from the previous month but remaining essentially flat compared to last year.
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