New home sales reach three-year high

September 25, 2025

New home sales soared to 800,000 in August, a 20.5% increase from July and the highest level since January 2022. All regions posted gains in August. A dip in mortgage rates boosted demand for new home sales, which are recorded at offer not closing. Cancelations have been rising, so the jury is out on how many of those gains will stick.

In absolute terms, the South accounted for the largest portion of the increase, up 105,000 alone with 24.7%. The Northeast registered a gain of 13,000, or 72%; it is the smallest market for newly built homes and has fallen in all but two months this year. The Midwest and West increased 12.7% and 5.6%, respectively.

Newly built homes for sale fell to 7.4 months of supply at the current sales pace. That is the lowest since July 2023. However, that is still above the level needed to be considered a balanced market, not seen since 2022. The median number of months between completion and sale was flat at 2.7 months.

Existing home sales, which are recorded at the contract closing and reflect activity from a few months prior, fell 0.2% in August. Gains in the existing market show up with a lag. Existing home sales are 1.8% above where they were a year ago. Elevated mortgage rates and limited inventory have weighed on existing home sales. The Northeast declined 4%, the South 1.1% in August. The Midwest and West recorded modest gains, up 2.1% and 1.4%, respectively.

The median sales price for new build rose 4.7% to $413,500. That is up 1.9% year-over-year, the first annual increase since May. That is far out of reach for many first-time home buyers. Notably, the average sales price rose 11.7% to $534,100, the third-highest reading on record behind April and June 2022. That means more expensive builds may have skewed the sales data. 51% of single-family homes sold were over $400,000; just 29% were in the $300,000 to $400,00 range, a steep decline from July's 34%. The price for existing homes was down 0.7% in August and up 2.0% year-over-year. While some local housing markets have experienced home price declines, we do not believe that will become a larger correction. Supply is constrained and millennials are aging into their prime home-buying years, supporting demand.

Consumer confidence and sentiment came in weaker in August, but lower mortgage rates and a Federal Reserve cutting cycle on the horizon appeared to have unleashed demand. The average 30-year fixed mortgage rate averaged around 6.6% in August, the lowest since October 2024. Mortgages are one of the only categories of consumer debt that have not shown significant signs of increasing delinquencies or defaults.

However, the mortgage market may not be the best marker for the health of the consumer The New York Federal Reserve Bank's Household Debt and Credit Report shows continual increases in the share of mortgage originations in the 720+ credit score group; purchases in all-cash remain elevated relative to pre-pandemic. Affordability remains a major hurdle; the rising costs of insurance, taxes and borrowing are deterring potential buyers.