Sales of newly built homes showed signs of life in July, with a 4.4% increase to a seasonally adjusted rate of 714,000 units, according to the Census Bureau. This exceeded expectations and marked a 31.5% increase compared to the previous year. The rise in sales suggests that buyers are turning to new construction due to the limited supply of existing homes.
This increase in new home sales comes despite the fact that mortgage rates have been rising. However, the higher rates may discourage current homeowners from selling and choosing to stay in their homes. As a result, sales in the resale market have declined to the lowest level for the month of July since 2010.
The imbalance between supply and demand has been favorable for builders, as they have not had to reduce prices as much to attract buyers. In July, only 22% of builders reported reducing prices, compared to 27% in May. The average sales price for newly sold homes in July was $436,700, up from the previous month’s average of $415,400.
However, the advantage for builders may change as mortgage rates continue to rise. Confidence among builders has already dropped in August, according to a survey from the National Association of Home Builders. The share of builders cutting prices has also increased, and builders will have to deal with an increased supply of homes.
Despite these challenges, if mortgage rates stabilize, sales are expected to continue to rise. There may be pressure on existing-home sellers to be more flexible and for builders to offer incentives to attract buyers.
Overall, the increase in new home sales in July is a positive sign amidst a sluggish housing market. It remains to be seen whether this trend will continue in the coming months.
Source: Yahoo Finance