New home sales unexpectedly fell last month as rising mortgage rates continued to discourage would-be buyers from making purchases.
New single-family home sales rose to a seasonally adjusted annual rate of 617,000 in June, the lowest in seven months, government data released Wednesday showed. That was down 7.4% from the same period last year and 0.6% from a revised May reading. Economists surveyed by Bloomberg had expected new-home sales to rise to a seasonally adjusted annual rate of 640,000.
Ongoing challenges, including high mortgage rates and rising home prices, continue to restrain buyer activity. Mortgage rates have been stuck at around 7% for the past year, which has consequently inhibited homebuying enthusiasm. Federal Reserve officials have signaled they may begin cutting interest rates this year, which would ease some of the pressure on mortgage rates.
“But if the recent trend of declining mortgage rates continues, as we expect, new home sales should rebound later this year,” Capital Economics economist Thomas Ryan wrote after the release. “While the number of residential listings is gradually increasing, the supply of existing homes is historically short due to ‘locked-in’ mortgage rates.”
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Meanwhile, homebuilders are rushing to build more homes to address a shortage in the existing home market as rising borrowing costs discourage sellers from listing their properties. The supply of new homes available for purchase rose 0.8% last month to 476,000 at the end of June, up 11.2% from the same period a year earlier.
Despite the drop in June sales, the average sales price of a new home rose to $417,300 in June from $407,100 in May, according to government data. The average sales price of a new home a year ago was $417,600.
Builders continue to offer incentives, such as lower mortgage rates, to stay competitive, but they continue to grapple with construction costs, rising interest rates and inventory issues.
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New home sales fell 0.6% in June from the previous month to 617,000, government data released on Wednesday showed. (Photo by Jim Watson/AFP via Getty Images) (Photo by Jim Watson via Getty Images)
Earlier this month, new data showed that business confidence among homebuilders had fallen to its lowest level since December as rising mortgage rates and soaring home prices have deterred homebuilders. The lack of confidence has made homebuilders increasingly reluctant to start projects.
Builders started construction on 1.35 million homes in June, up 3 percent from May’s figure but down 4.4 percent from a year earlier, according to government data, as rising interest rates prompted builders to retreat.
The story continues
The slowdown in homebuilding comes amid rising inventory in both the existing and new home markets: Nearly two-thirds of homes for sale in June stayed on the market for at least 30 days without a deal, according to data from Redfin.
Dani Romero is a reporter for Yahoo Finance. Follow her on X Dani Romero TV.
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