US New Home Sales Declined 8.7% in August as Mortgage Rate Strangle Affordability

New home sales declined 8.7% month-over-month in August to a seasonally adjusted annual rate of 675,000 units (consensus 695,000) from an upwardly revised 739,000 (from 714,000) in July. On a year-over-year basis, new home sales were up 5.8%. Rising mortgage rates create added affordability pressures. Reality is though with rates over 7.2%, and inflation high- and real-income hurt lower affordability and supply pressures remain for many prospective buyers. There is some new home sales activity being helped by the tight supply of existing homes for sale.

Home Sale
Home sales

US new home sales for August 2023

  • New home sales declined 8.7% month-over-month in August to a seasonally adjusted annual rate of 675,000 units (consensus 695,000) from an upwardly revised 739,000 (from 714,000) in July.
  • On a year-over-year basis, new home sales were up 5.8%.
  • Median price of new houses sold was $430,300, while the average sales price was $514,000, below $440,300 and $530,800 respectively, a year ago.
  • There were 436K houses left to sell at the end of August, corresponding to 7.8 months of supply at the current sales rate.
MONTHLY NEW RESIDENTIAL SALES, August 2023

New home sales month-over-month by region:  

  • Midwest sales plunged (-17.2% to 77K),
  • West (-9.4% to 183K)
  • South (7.5% to 383K)
  • Rose in the Northeast (6.7% to 32K).

Note new home sales in the West has the highest concentration of higher-priced homes. The report reflects how rising mortgage rates are impeding sales of higher-priced homes, evidenced by the year-over-year declines in both median and average selling prices.

The report confirms the effect of rates and new home sales remain concentrated in higher-priced homes, as inflation pressures, pushed by supply constraints and labor shortages, are curtailing the building of lower-priced homes and pinching affordability for lower-income buyers.

United States New Home Sales

Earlier today the latest data from the Mortgage Bankers Association for the week ending 18 August 2023 was released:

The weekly mortgage applications index declined 4.2% with purchase applications down 5.0%, hitting their lowest level since 1995, and refinancing applications down 3.0%.

  • US MBA mortgage applications w.e. 18 August -4.2% vs -0.8% prior
  • Market index 184.8 vs 193.0 prior
  • Purchase index 142.0 vs 149.5 prior
  • Refinance index 397.1 vs 408.4 prior
  • 30-year mortgage rate 7.31% vs 7.16% prior

Existing home sales account for 90% of US transactions and are calculated on a contract close basis. New home sales account for the remaining 10% and are based on contract signings.

The big question is after the surge in rates and slash in rates how much damage has been done with the massive wealth erosion.

Source: Census.gov

From The TradersCommunity News Desk