Sales of new US single-family homes plunged to a 6½-year low in July as persistently high mortgage rates and house prices further eroded affordability.
The housing market has been the sector hardest hit by the aggressive interest rate increases delivered by the Federal Reserve to tame inflation. The report from the Commerce Department on Tuesday added to a stream of weak housing data.
New home sales tumbled 12.6% to a seasonally adjusted annual rate of 511,000 units last month, the lowest level since January 2016. June’s sales pace was revised down to 585,000 units from the previously reported 590,000 units.
Sales rose in the Northeast, but dove in the West and the Midwest as well as the densely populated South.
Economists polled by Reuters had forecast that new home sales, which account for a fraction of US home sales, would decrease to a rate of 575,000 units.
Sales dropped 29.6% on a year-on-year basis in July. They peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006.
Data last week showed single-family housing starts, which account for the biggest share of homebuilding, tumbled to a two-year low in July, while home resales fell to levels last seen in May 2020. The National Association of Home Builders/Wells Fargo Housing Market sentiment index fell below the break-even level of 50 in August for the first time since May 2020.
The Fed has hiked its policy rate by 225 basis points since March to slow the economy and, in turn, curb inflation.
Fed Chair Jerome Powell’s address on Friday at the annual Jackson Hole global central banking conference in Wyoming could signal how much further the US central bank needs to tighten monetary policy.
Mortgage rates, which move in tandem with US Treasury yields, have soared even higher than the Fed’s benchmark overnight interest rate. The 30-year fixed-rate mortgage is averaging 5.13%, up from 3.22% at the start of the year, according to data from mortgage finance agency Freddie Mac.
Despite slowing demand, house price growth remains strong. The median new house price in July was $439,400, an 8.2% jump from a year ago. There were 464,000 new homes on the market at the end of last month, up from 450,000 units in June.
Houses under construction made up roughly 67.2% of the inventory, with homes yet to be built accounting for about 23.1%. At July’s sales pace it would take 10.9 months to clear the supply of houses on the market, up from 9.2 months in June.
[Written in collaboration with other media outlets with information from the following sources]
