Sales of new U.S. homes fell for the fifth time this year in June to a more than two-year low, as a mix of high prices and rising mortgage rates thwarted prospective buyers.
Purchases of new single-family homes decreased 8.1%, to a 590,000 annualized pace from a downwardly revised 642,000 in May, government data showed Tuesday. The median estimate in a Bloomberg survey of economists called for a 655,000 rate.
The figures reflect a cooling market as the Federal Reserve raises interest rates to soften demand in the broader economy and tame decades-high inflation. The average rate on a 30-year mortgage is nearly double what it was a year prior. Coupled with high home prices, the rapid run-up in borrowing costs has sidelined many potential buyers and triggered more canceled deals.
Other data Tuesday from the Conference Board showed the share of consumers planning to buy a home in the next six months dropped to 4.4% in July, the lowest in nearly seven years, from 5.7%. Overall consumer confidence fell to the weakest point since February of last year on dimmer views of the economy because of inflation.
Separate reports last week showed a slowdown in building activity and a two-year low in home resales amid intensifying affordability concerns. The Indianapolis area also has seen a decline in existing-home sales and permit filings for new homes.
The new-home sales report, produced by the Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home rose 7.4% from a year earlier, to $402,400. It marked the smallest annual gain since November 2020.
The number of homes sold in June and awaiting the start of construction—a measure of backlogs—rose from a month earlier to 184,000, the most since January, the report showed.
There were 457,000 new homes for sale as of the end of the month, the most since 2008, with 91% under construction or not yet started. At the current sales pace, it would take 9.3 months to exhaust the supply of new homes, compared with 8.4 months in the prior month.
“The supply of both new and resale homes at affordable prices remains limited,” David Auld, chief executive at D.R. Horton Inc., said on the builder’s latest earnings call. “Although demand has slowed from the frenzy pace we experienced over the past year, there are still qualified buyers in the market today, as household formations continue and inflationary pressures drive rents higher.”
Sales fell in three of four in U.S. regions. Purchases slumped about 36.7% in the West, dropped 2% in the South and fell 5.3% in the Northeast.
New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously-owned homes, which are calculated when contracts close.
The new-homes data are volatile; the report showed 90% confidence that the change in sales ranged from a 23.1% decline to a 6.9% increase.