Sales of new-single family homes fell to a seasonally adjusted annual rate of 697,000 units during June, according to new estimates from the U.S. Census Bureau and the Department of Housing and Urban Development.
That equates to a drop of 2.5% month over month, although new home sales are still up 23.8% year to year. Additionally, May’s sales pace was downwardly revised, from the previously reported 763,000 units to 715,000, still the fastest rate of new home sales since February last year.
The June rate failed to meet expert expectations, with a Reuters poll of economists estimating 725,000 units on an annualized basis. The monthly dip brought an end to a streak of four straight increases, with the swelling cost of credit likely playing a role in cooling the market.
“Rising mortgage rates in June, coupled with elevated construction costs and supply chain issues for electrical transformers, acted as headwinds on the new home sales market,” said Alicia Huey, chair of the National Association of Home Builders (NAHB).
“Demand for new homes cooled in June primarily due to a more than quarter-point rise in mortgage rates over the previous month,” concurred Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “However, the lack of existing inventory and the Federal Reserve nearing the end of its rate hikes signal that demand for new homes may rise in the coming quarters.”
New home sales over the past few months generally remain strong, and June’s annualized pace is still 11.5% stronger than the recent trough hit in February. Strong demand in newly built homes has helped builders quell the use of heavy discounts as an incentive for buyers. The median new home sale price in June was $415,400 — down approximately 4% from the same month last year, a smaller year-over-year drop than those of past months.
The more moderate pace of sales in June led to a small improvement in inventory for the month. On a seasonally adjusted basis, there were 432,000 units for sale at the end of June. That remains down 3.6% compared to June last year, but it’s up from 429,000 in May to mark the first monthly increase in the count of new homes on the market since October. At the current sales pace, there are roughly 7.4 months of supply, up from 7.2 in May.