New single-family home sales fell in August as the average mortgage rate topped 7%, according to a new report by the National Association of Home Builders (NAHB).
Sales of newly built, single-family homes in August declined 8.7% to a 675,000 seasonally adjusted annual rate from an upwardly revised July reading, according to the report, which is based on data from the Housing and Urban Development Department and the Census Bureau. New home sales in August grew 5.8%, however, when compared to a year ago.
A dearth of existing homes for sale has pushed buyers to seek out new builds, as Kiplinger recently reported.
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“Sales weakened in August with average mortgage rates above 7%,” said Robert Dietz, NAHB chief economist. “While some builders were able to offset that effect via mortgage rate buydowns, rates moved higher this month, suggesting the pace of new home sales will weaken further for September.”
New single-family home inventory was 436,000 in August, down 5.2% from a year ago. Of the total home inventory in August, which includes both new and resale homes, newly built homes represented an elevated share of 31% of those available for sale, and nearly 16% of total home sales during the month were new homes, NAHB said.
Supply-side concerns linger
“Builders continue to grapple with supply-side concerns in a market with poor levels of housing affordability," said Alicia Huey, NAHB chair and a custom home builder and developer from Birmingham, Alabama. “Higher interest rates price out demand, as seen in August, but also increase the cost of financing for builder and developer loans, adding another hurdle for building.”
The median sale price of a new home fell about 2% to $430,300 in August compared to a year ago, which is primarily attributable to builder incentives and a shift toward building slightly smaller homes, NAHB said.
“Builders are being more cautious about managing their inventory in this rising rate environment,” Dietz said. “A year ago, 10% of the new home inventory listed for sale consisted of homes that had not yet started construction, and that share has now risen to 17% of the total inventory.”
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