New home sales rose 10.6% in July on a seasonally adjusted basis to 739,000, up from a revised seasonally adjusted annual figure of 668,000 in June, according to data released Friday by the Census Bureau. Those figures beat the Bloomberg consensus forecast for sales to reach 623,000.
The increase in sales activity likely reflects the fact that lower interest rates are incentivizing many home builders to offer more attractive rates to would-be homebuyers who may finally be able to find relief from the home-buying woes that have plagued the housing market for nearly two years.
In recent weeks, 30-year mortgage rates have fallen below 7% and are currently at their lowest since May 2023. Still, they remain double the rate they were three years ago.
“this is, [builders] “They have tools that the incumbent housing market can’t compete with, and frankly, small private builders can’t compete with either,” John Lovallo, U.S. homebuilding and building products equity research analyst at UBS, recently told Yahoo Finance.
Still, some buyers are waiting for interest rates to fall further.
Applications to buy a home fell 5% last week to the lowest level since February, according to data released Wednesday by the Mortgage Bankers Association.
Meanwhile, homebuilders continue to add supply, with inventory reaching 462,000 homes in July. At the current sales pace, it would take seven and a half months to sell through this inventory. A six-month sales pace represents a balanced market.
But despite falling interest rates, home prices remain elevated, with the average sales price of a new home rising to $429,800 in July from $416,700 the previous month.