Homebuilders are still getting squeezed by high mortgage rates.
That’s according to the U.S. Census Bureau’s new-home sales report for June, which shows the level of transactions falling to a seasonally adjusted annual rate of 617,000. That represents a decline of 7.4% year over year and 0.6% month over month, and it’s the second month in a row that the pace of home sales has fallen.
The drop in sales is causing a rapid rise in unsold inventory. Supply jumped by a whopping 20.8% year over year to 9.3 months at the current sales pace. It’s the second month in a row that supply has increased.
The rise in supply has yet to meaningfully impact the price of new-home sales. The median price stayed flat in June, registering at $417,300, a $300 drop from June 2023 and a 2.5% rise from the revised May 2024 number.
“The surge in mortgage rates earlier this spring softened housing demand, leading to a slowdown in sales and an increase in both resale and new home inventory levels,” Zillow senior economist Orphe Divounguy said in a statement. “But well-priced and marketed listings are still selling relatively quickly.”
The new-home supply build-up is less dramatic in the existing-home market. According to the June existing sales report from the National Association of Realtors (NAR), sales declined, but the price jumped 4.1% year over year and months of supply is considerably lower at 4.1.
“Though new home inventory in June remained elevated at a 9.3-month supply at the current building pace, there is still a long-run need for more construction because existing inventory remains relatively low,” Jing Fu, director of forecasting and analysis for the National Association of Home Builders (NAHB), said in a statement.
“Due to a lack of resale homes for sale, the combined inventory for new and existing single-family homes remains lean at a 4.7 months’ supply, according to NAHB estimates.”
Two areas of the country have eye-popping numbers for new-home sales. The Midwest tallied a yearly pace of 81,000 sales in June, a 32.6% year-over-year increase. This regional pattern has been building over the course of the year. Conversely, the Northeast saw a somewhat shocking 63.6% year-over-year drop to a pace of only 12,000 new-home sales.
“Where housing is more affordable, such as in the Midwest, things have been better, but more expensive markets are getting harder to grow sales from not very elevated levels either,” HousingWire Lead Analyst Logan Mohtashami said.
The South also experienced a hefty, if less dramatic, drop of 12.2% year over year to a pace 375,000 sales, although that number is flat relative to the revised May number. The sales rate grew to 149,000 in the West, up 2.8% year over year and 1.4% higher than a month ago.
