:max_bytes(150000):strip_icc()/GettyImages-1244292242-772e9986623f407e9d15c6036992b87c.jpg "New home sales rose surprisingly quickly in July")
Key findings
- Homebuilders sold their homes faster than economists expected; new home sales rose 10.6 percent in July.
- Sales of new homes are a “bright spot” in the real estate market, said one economist, and they are doing significantly better than sales of existing homes.
- Construction interest rate incentives, a continued low supply of existing homes and falling interest rates promoted the sale of new homes.
New home sales rose in July as homebuyers were encouraged by lower interest rates and construction incentives.
Sales of new single-family homes rose 10.6 percent from revised June figures, reaching an annual rate of 739,000 homes, the Census Bureau said Friday. This was above the 668,000 forecasters surveyed by Dow Jones Newswires and The Wall Street Journal expected.
“New home sales continue to be the only bright spot in the housing market,” wrote Daniel Vielhabe, economist at Nationwide.
By comparison, the existing home sales report released Thursday showed the lowest growth for a July since 2010.
Why are existing home sales doing well?
Sellers are hesitant to trade their low mortgage rates for higher current rates, resulting in fewer existing property options for buyers and higher prices. As a result, buyers are turning to new construction.
Builders may offer incentives to help cover costs as high mortgage rates price some out of the market. According to the National Association of Home Builders, 64% of builders used incentives to attract buyers — the highest level since April 2019.
In addition, mortgage rates fell in August, reaching near a 16-month low. Economists expect a further decline.
“Current inflation data points to interest rate cuts by the Federal Reserve, and mortgage rates fell significantly in the second week of August. Buyer interest and developer sentiment should improve in the coming months,” said Robert Dietz, chief economist at NAHB.
