Sales of newly built single-family homes were down in July but managed to exceed economist expectations in a Pyrrhic victory for home builders who have been forced to get creative to combat affordability challenges.
An estimated 652,000 new homes were sold in July on a seasonally adjusted annual basis, according to data released Monday by the U.S. Census Bureau and Department of Housing and Urban Development. The median estimate among economists surveyed by Bloomberg was 630,000 units.
But the 652,000 figure is 0.6% below June’s 656,000 mark (revised upward from the 627,000 units previously reported) and 8.2% below the July 2024 rate of 710,000.
The median sales price of new houses sold in July was $403,800, which is 0.8% below June’s median price of $407,200 and is 5.9% below the July 2024 price of $429,000.
The price reductions are part of a broader trend of home builder incentives, according to First American Deputy Chief Economist Odeta Kushi.
“Builders have relied heavily on incentives, such as mortgage rate buydowns, upgrades and even price reductions, to support demand and maintain an edge over the existing-home market,” Kushi wrote in an analysis. “However, the recent pattern of sales — holding at relatively subdued levels — suggests these measures are becoming less effective amid strained affordability, rising resale inventory and macroeconomic uncertainty.”
A recent survey from the National Association of Home Builders and Wells Fargo found that 66% of builders used sales incentives in August, up from 62% in July. The August percentage is the highest of the post-pandemic era.
About 37% of builders reported cutting prices in August, which is down slightly from July’s 38% mark.
As builders struggle to sell newly built homes, “supply has swelled across the country,” noted Wells Fargo economists Jackie Benson and Ali Hajibeigi.
“Inventories are especially elevated in the South and West,” Benson and Hajibeigi wrote, “the former of which is at its highest level on record. Although not quite a record high, new home supply in the West is near its greatest heights since 2008.”
For-sale inventory in July was at a supply of 9.2 months at the current sales rate, which was unchanged from June’s estimate but was 16.5% above July 2024’s estimate of 7.9 months of supply.
“High mortgage rates, economic uncertainty and a softening labor market are keeping buyers on the sidelines,” the Wells Fargo economists observed. “Single-family home builders face added pressure from elevated inventories, which is likely to discourage a near-term rebound in single-family construction.”
