New home sales fell for the second consecutive month in July, according to data released Tuesday by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau.
Sales of new single-family homes in June were at a seasonally adjusted annual rate of 511,000, down 12.6% from June and down 19.6% compared to a year ago. The sales pace is at its lowest level since 2015.
“Homebuilders have also pulled back activity after months of sustained hits to builder sentiment, reducing the number of new homes in the pipeline to be sold,” Nicole Bachaud, Zillow’s senior economist, said in a statement.
Inventory of new homes for sale rose slightly in July to 464,000 units, representing a 10.9 month supply at the current sales pace, up from 9.3 months in June.
Experts attribute the rise in inventory to the cooling buyer demand and slower housing market conditions.
One of the reasons for the weaker buyer demand is the higher sales prices. In July, the median sales price for a newly built single-family home was $439,400, up from $402,400 in June, but below April’s all-time high of $450,000.
“As affordability remains a challenge for buyers, builders could continue to see the demand pool for completed new homes drying up, so a low flow of both new inventory and sales could continue into the months ahead,” Bachaud said. “Builders are also struggling to find qualified buyers at an agreeable price, as many builders report an uptick in price cuts and incentives in an effort to meet buyers where they are, but that isn’t enough to boost new home sales as the July data was far below consensus.”
New home sales were down month over month in three of the four major U.S. regions — the Midwest (20.6%), the South (-12.1%), and the West (-13.3%) — while the pace of new home sales rose in the Northeast (13.3%). Year over year, all four regions recorded declines, with the West posting the largest decline at -50.3%, followed by the Northeast (-37.0%), the Midwest (-22.9%) and the South (-20.8%).
Looking ahead, market conditions do not look great for builders as mortgage applications for new home purchases were also down in July, dropping 16.1% year over year, according to the latest Mortgage Bankers Association‘s builder application survey.
