Sales of new single family homes plummeted in July as homebuyers pulled back with force from a market bruised by high mortgage rates and rising inflation, new data shows.
Sales of new homes dropped 12.6 percent in July to a seasonally adjusted rate of 511,000, which was 29.6 percent below the levels seen in July 2021, according to data released Tuesday by the United States Census Bureau and the Department of Housing and Urban Development.
The drop brings new home sales to their lowest levels seen since before the pandemic, and represents the slowest pace of sales seen since early 2016.
It’s just the latest sign of a housing market that is slowing rapidly in the face of high borrowing costs and decreased demand. Construction of new homes has dropped off, along with the sales of existing homes and applications for mortgages, which have fallen to their lowest levels in more than 20 years.
Multiple housing experts have recently gone as far as to declare that the United States is in a housing recession as weaker numbers posted month after month have made housing one of the most affected parts of the shifting economy.
“The sharp drop in new home sales is another clear indicator that housing is in a recession,” Danushka Nanayakkara-Skillington, the assistant vice president for forecasting and analysis at the National Association of Homebuilders said in a statement. “The combination of higher prices and increased interest rates are generating a notable slowing of the housing market.”
Despite the drop off in demand, housing prices continue to grow, with the price of a new home 8.2 percent higher than it was in July 2022 than in 2021, according to data from the personal finance website NerdWallet.
For buyers, this has translated to a market with sky-high prices, but with more of a sense of normalcy as competition is not as intense as it was when borrowing rates were lower and bidding wars were all but expected with every purchase.
The median sales price of a new home hovered at $439,000 in July, while the average sales price clocked in at a whopping $546,800, according to census data.
The seasonally adjusted estimate of new houses for sale at the end of July curved upward to $464,000, representing a supply of 10.9 months at the current sales rate.
Sales were down in three out of four regions, with the West seeing a 20 percent drop. Only the Northeast recorded a rise of 13.3 percent month over month while still charting a 37 percent annual decline.