US New-Home Sales Fall More Than Forecast to Two-Year Low

Sales of new US homes fell for the fifth time this year in June to a more than two-year low, as a mix of high prices and rising mortgage rates thwarted prospective buyers.

Purchases of new single-family homes decreased 8.1% to a 590,000 annualized pace following a downwardly revised 642,000 in May, government data showed Tuesday. The median estimate in a Bloomberg survey of economists called for a 655,000 rate.

A cooling market

The figures reflect a cooling market as the Federal Reserve raises interest rates to soften demand in the broader economy and tame decades-high inflation. The average rate on a 30-year mortgage is nearly double what it was a year prior.

Coupled with high home prices, the rapid run-up in borrowing costs has sidelined many potential buyers and triggered more canceled deals.

Separate reports last week showed a slowdown in building activity and a two-year low in home resales amid intensifying affordability concerns.

The new-home sales report, produced by the Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home rose 7.4% from a year earlier, to $402,400.

Number of homes sold

The number of homes sold in June and awaiting the start of construction -- a measure of backlogs -- rose from a month earlier to 184,000, the most since January, the report showed. 

There were 457,000 new homes for sale as of the end of the month, the most since 2008, with 91% under construction or not yet started.

At the current sales pace, it would take 9.3 months to exhaust the supply of new homes, compared with 8.4 months in the prior month.

“The supply of both new and resale homes at affordable prices remains limited,” David Auld, chief executive officer at D.R. Horton Inc., said on the builder’s latest earnings call.

“Although demand has slowed from the frenzy pace we experienced over the past year, there are still qualified buyers in the market today, as household formations continue and inflationary pressures drive rents higher.”

Sales fell in three of four in US regions. Purchases slumped about 36.7% in the West, dropped 2% in the South and fell 5.3% in the Northeast.