Despite an unexpected rise the month prior, new single-family home sales returned to their downward trend that took hold earlier this year.
According to a joint report from the U.S. Census Bureau and the Department of Housing and Urban Development (HUD), the seasonally adjusted sales rate was 590,000, representing an 8.1% drop below the revised May rate of 642,000 and a 17.4% decrease below the June 2021 estimate of 714,000.
While new homes became popular for buyers in recent years under the limited supply of existing listings on the market, experts suggest that June’s decline indicates the impact that rising housing prices and mortgage rates have had on buyer morale.
Key findings:
- 590,000 new single-family homes sold in June.
- The median sales price of new houses sold in June was $402,400.
- The average sales price was $456,800.
- The seasonally adjusted estimate of new homes for sale at the end of June was 457,000.
What the experts think:
“June’s new home sales data reflects the impact of another month of high mortgage rates and rising inflation,” said Hannah Jones, economic data analyst at realtor.com®. “The double-whammy of rising borrowing costs and still-climbing listing prices is making it harder for buyers to find a suitable home in their price range. As a result, many home shoppers have decided to suspend buying plans altogether in recent months, which has allowed for housing inventory to recover from last year’s declines.
“While the increase in for-sale homes offers a breath of fresh air to buyers who remain in the market, builders have responded to cooling demand by slowing the pace of new home construction. New homes gained popularity during the past couple of years as existing home inventory became increasingly sparse. The recent decline in buyers has been taken as a signal to slow new home construction for the time being, as builders, buyers and sellers alike see how the market settles in the new financial environment,” she added.
“New home prices showed signs of easing in June, dropping 9.5% month-over-month to $402,400, but still up 7.4% year-over-year. Half of new homes were priced below $400,000 this June, a decline from 55% of new homes in this range just one year ago, but an improvement compared to just 40% of homes below this mark in May. Builders eager to move new homes amid a cooling market offered buyers a good deal, continuing May’s downward trend in median new home prices. This increased affordability indicates a potential shift from trade-up buyers and investors to buyers looking to new construction for relative affordability. A trend of affordable new construction may continue, as lumber prices dropped below $600 this week, potentially offering builders some flexibility to address buyer concerns in their pricing strategies,” Jones concluded.
“Builders saw sales decline significantly as buyers were priced out of the market on higher interest rates and ongoing home building and development costs, including building materials,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Georgia. “This is just the second time that new home sales have fallen below a 600,000 annual pace since Oct. 2018, and this latest report also mirrors a sharp decline in builder confidence as noted in our latest survey.”
“Buyers are balking due to deteriorating affordability conditions and growing sticker shock,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “Only 14% of new home sales in June were priced below $300,000. A year ago, it was 27%. Meanwhile, inventory levels are elevated and will contribute to near-term production declines as the market finds a new balance.”
