In another sign that the housing market may be finding stability, new home sales in August fell by a less-than-expected 4.7% from the previous month to an annual rate of 716,000, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
August’s sales fit between July’s revised new single-family home sales of 751,000 and June’s much slower annual sale pace of 668,000 homes. The August figure represented a 9.8% rise in new home sales during the past 12 months and a 4% rise on a year-to-date basis.
While the slower pace may seem disappointing, August’s sales figures were above the annual rate of 700,000 that some housing economists had expected, and the three-month moving average for new home sales was at its highest level since March of 2022, according to the National Association of Home Builders (NAHB). Continuing interest rate cuts also are expected to improve future home sales and spur more construction.
Haseeb Rahman, portfolio manager at Palisades Group, said that the sales drop fit within seasonal trends.
“While August new home sales dropped 4.7% compared to July 2024, we were not surprised to see an August pullback with the tail-end of the ‘summer selling season,’” Rahman said. “We do expect future trends will largely hinge on the direction of mortgage rates, with rates having come down steadily since the beginning of August.”
“While existing-home sales have struggled to gain any momentum, the new-home market has remained a relative bright spot in the housing market due to builders’ ability to offer incentives and bring buyers off the sidelines,” added Odeta Kushi, the deputy chief economist for First American Financial Corp. “There is better news on the horizon, however. According to NAHB, builder sentiment increased in September as mortgage rates declined by more than one-half of a percentage point from early August through late-September. Additionally, builders now have a positive view for future new-home sales for the first time since May 2024.”
New single-family home inventory increased 1.7% to 467,000 in August, which equates to a 7.8-month supply at the current sales pace. The inventory of completed and ready-to-occupy homes increased to 105,000, which is the highest level since 2009.
There was also good news for homebuyers concerning new home prices. In August, the median new home was selling for $420,600, which was down 4.6% from a year ago. New homes priced below $300,000 made up 18% of sales in August, up from 12% a year ago.
“Builder sentiment and future sales expectations are improving as the Federal Reserve begins a credit easing cycle,” said Carl Harris, NAHB chairman. “However, due to the mortgage interest lock-in effect, declining interest rates will mean rising existing home inventories and some additional new competition for home builders.”
