By Michael Sasso | Bloomberg
New home sales in the U.S. rebounded to their highest level since May 2023 as buyers took advantage of lower mortgage rates and a wider selection of deals.
The number of contracts signed for new single-family homes rose 10.6 percent last month to an annual rate of 739,000, government data showed Friday, reflecting gains in all four major regions. The pace exceeded all estimates in a Bloomberg survey of economists.
The increase in sales suggests that the combination of lower mortgage rates and generous sales incentives from builders is starting to take effect. Potential buyers are finding more options in the new-construction market, as the supply of existing homes is still very limited. Asking prices are also more competitive compared to the resale market.
Mortgage rates have fallen to 6.5% from a high of nearly 7.3% in April and are expected to fall further as the Federal Reserve prepares to start cutting rates next month. Chairman Jerome Powell said Friday at the central bank’s annual symposium in Jackson Hole, Wyoming, that “the time has come” to cut rates.
Rising sales helped builders reduce inventories last month, which fell to the lowest level since the beginning of the year. However, the 462,000 homes for sale are still nearly the highest since 2008.
At the current sales rate, that’s 7.5 months of supply, the lowest since September but above pre-pandemic levels. Increased inventory is helping keep prices low: The median sales price of a new home fell 1.4% year over year to $429,800 in July. Prices have fallen on an annualized basis in all but one month this year.
While inventory in the resale market is slowly rising as some homeowners part with their pandemic-low mortgage rates, supply is still historically low, keeping homes expensive. The median price for used homes last month hit a record high for any July over the past two decades, according to separate data released Thursday.
Despite declining industry-wide sales, the nation’s largest homebuilders have posted strong profits recently by luring buyers with price cuts and low mortgage rates.
Shares of Toll Brothers Inc. rose earlier this week after the luxury maker said deliveries will be at the high end of its annual forecast. The industry as a whole is also doing well: A homebuilder exchange-traded fund is up 42% in the past year, while the S&P 500 is up just 27%.
By region, sales in the West rose the fastest since February 2022. Contract signings in the Midwest were the strongest in three years.
New home sales are considered a more timely indicator than used home purchases, which are calculated at the time of closing. However, the data is volatile. The government report showed 90 percent confidence that the change in new home sales ranged from a 5.9 percent decrease to a 27.1 percent increase.
