New home sales lowest since 2023

July 24, 2024

New home sales slumped 0.6% in June after May sales were revised slightly higher. Sales are captured at the contract signing and reflect more recent activity in the housing market than existing home sales. The Northeast and Midwest led the drop in sales, while the South was essentially flat on the month; the West posted a small gain. Sales were 7.4% lower than a year ago, the second consecutive month of an annual drop.

The supply of new homes available for sale ticked up 0.8% in June, an 11.2% increase from a year ago. More homes are being completed and are available for sale, which is good news for the supply-constrained housing market. Newly built homes are usually priced at a premium to the resale market, although that gap has flipped in the last two months. The median price of a newly built home sold in June was $417,300, while the median price of a single-family home for resale in June was $432,700. Sales of existing homes for $1 million or more were the only category with year-on-year gains in activity.

Existing home sales, which are captured at the contract closing and reflect housing market activity a few months prior, fell 5.4% in June to the lowest level since December of last year. Mortgage rates peaked at 7.2% in early May, which pulled down demand. The 30-year fixed rate mortgage has fallen slightly since then but remained around 6.8% by mid-July. Sidelined buyers are waiting for rates to fall lower, especially as expectations for interest rate cuts in the third quarter are picking up.

The inventory of homes available for resale in the month hit the highest level since October of 2020 at 1.32 million (this includes condos and co-ops). During the housing bubble of the early 2000s, inventory was between two to four million units. We didn’t have the millennial generation hitting their prime home buying years back then; the market became oversupplied. This time, we have significant pent-up demand from the largest generation in the workforce, which can be unleashed once lower interest rates help ease affordability challenges.