US new-home sales rose in July to the highest level in over a year as homebuilders continue to benefit from limited supply in the resale market.
(Bloomberg) — US new-home sales rose in July to the highest level in over a year as homebuilders continue to benefit from limited supply in the resale market.
Purchases of new single-family homes increased 4.4% to an annualized 714,000 pace after downward revisions to prior months, government data showed Wednesday. The median estimate in a Bloomberg survey of economists called for a 703,000 pace.
With mortgage rates at the highest level in more than two decades, most homeowners are unwilling to move, keeping inventory on the resale market extremely limited. That’s encouraged prospective buyers to seek out new construction, and builders are also throwing in more incentives.
However, the recent pickup in mortgage rates is weighing on homebuilder sentiment and already translating into weaker demand. A report earlier Wednesday showed mortgage rates rose to 7.31% last week, the highest level since late 2000. That took a gauge of home-purchase applications down to the lowest level since 1995.
Read more: US Home Purchase Applications Hit Lowest Since 1995 on Rate Rise
At the same time, a combination of tight supply and high costs continues to weigh on affordability. The median sales price of a new home climbed to $436,700 from a year earlier, according to the Commerce Department’s report. That’s well above pre-pandemic levels.
The number of homes sold in July and awaiting the start of construction — a measure of backlogs — declined to lowest level this year.
The data showed there were 437,000 homes for sale as of the end of last month. That represents 7.3 months of supply at the current sales rate, matching the lowest since early 2022.
Sales rose in the Midwest and West to the highest level since early last year, while they fell in the Northeast and South.
New-home sales are considered a timelier barometer than purchases of previously-owned homes, which are calculated when contracts close. Those sales fell to the lowest since the start of the year in July as inventory remained restrained, hurting affordability.
The new-homes data are volatile. The report showed 90% confidence that the change in sales ranged from a 8.4% decline to a 17.2% gain.
–With assistance from Jordan Yadoo.
(Adds more details starting with backlogs. A previous version corrected the scope of increase and percent change)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.