Surprise Lift for New Home Sales in July

Sales of new homes rose unexpectedly in July, following significant revisions in the previous months data.

Sales of newly built, single-family homes in July rose 10.6% to a 739,000 seasonally adjusted annual rate from significant upward revisions in June, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in July is up 5.6% from a year earlier. After the notably higher revisions for the May and June data, new home sales from January through July of 2024 are up 2.6% compared to the same period in 2023. 

While mortgage rates moved lower in July, the Census estimated gains for new home sales do not match recent industry survey data including the NAHB/Wells Fargo Housing Market Index, which showed weakness in the current sales index. The Census estimate of new home sales is often volatile and subject to revisions, and it is possible that the July estimate for sales will be revised lower next month. NAHB is forecasting gradual improvements for the home building sector as the Fed eases monetary policy and mortgage interest rates trend lower.

A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the July reading of 739,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory in July ticked lower to a level of 462,000, down 1.1% from the previous month. Only 16.7% of inventory available for purchase consists of completed, ready-to-occupy homes (102,000), although this inventory component is up 44% from a year ago.

The total new home inventory level represents a 7.5 months’ supply at the current building pace. While this reduced level of months’ supply is above the commonly used balance measure of 6, the measure of total home inventory is lower. Given a lean level of resale inventory, total home inventory (new and existing) is near 4.5, which remains low.

The median new home price was $429,800, up 3.1% compared to last month, and a 1.4% decrease from this time last year.

Regionally, on a year-to-date basis, new home sales are up 5.4% in the Northeast, 22.1% in the Midwest and 6.1% in the West. New home sales are down 2.4% in the South.