New-home sales decline to lowest level since January

By Michael Sasso | Bloomberg

US new-home sales declined in July to a six-month low, indicating higher mortgage rates are curbing demand even as builders trim prices and offer incentives.

Contract signings on new single-family homes decreased 10.5% last month to a 607,000 annual rate, according to government figures released Tuesday. Economists surveyed by Bloomberg expected a 620,000 annualized sales pace, based on the median estimate.

The median sales price fell 0.9% from a year earlier to $393,800.

Sales have fallen in three of the last four months, adding to evidence of a housing market burdened by elevated finance costs and prices. While builders have had some success bolstering demand with free upgrades, mortgage rate buydowns and price reductions, the entry-level market remains affordability-constrained.

DR Horton Inc., known for its affordable starter homes, said last month that it expects to sell fewer houses than previously expected. At the same time, Toll Brothers Inc. last week reported an increase in signed contracts in the three months through July.

The luxury homebuilder said its affluent customers are less sensitive to moves in mortgage rates and able to use proceeds from the sale of a previous home to trade up.

Meanwhile, consumer confidence remains weak. Separate data out Tuesday from the Conference Board showed sentiment dropped to the lowest level since the start of the year on more downbeat views about future job and income prospects.

The government’s report showed that the supply of new homes for sale decreased 1.6% in July from a year ago to 488,000, representing 9.6 months of inventory at the current sales rate. Builders have limited the pace of new construction as they sell off a bloated inventory of properties on the market.

Sales in the South, the nation’s biggest homebuying region, slumped 13% in July to an annualized 383,000. Sales in the Midwest dropped nearly 43%, the lowest level since 2012. Contract signings rose in the West and Northeast.

New-home sales are seen as a more timely measurement than purchases of existing homes, which are calculated when transactions close. However, the data are volatile on a monthly basis. The government report showed 90% confidence that the change in new-home sales ranged from a 24.5% decline to a 3.5% gain.

Laura Yin and Mark Niquette at Bloomberg contributed to this report.