New Home Sales Surge as July Mortgage Rates Ease

In July, new single-family home sales surged to a seasonally adjusted annual rate of 739,000 units, marking a 10.6% increase from June and a 5.6% rise compared to July 2023. This significant jump followed a period of sluggish sales due to high interest rates and limited inventory. The recent dip in mortgage rates, which fell from around 7% in early July to 6.54% by early August, is credited with driving the boost in home sales. Industry experts highlighted this as a positive sign for the housing market, with new-home sales outperforming the struggling existing-home market.

However, not everyone is optimistic. The National Association of Home Builders (NAHB) cautioned that July’s strong sales figures might be misleading, pointing to potential discrepancies between the Census data and industry surveys, which showed weaker sales trends. Despite this, the NAHB still expects gradual improvements in the home-building sector as mortgage rates continue to ease. The median sale price for new homes in July was $429,800, slightly up from June but down 1.4% compared to last year. The supply of new homes stood at 7.5 months, indicating that while inventory is tight, there is still room for cautious optimism in the market.

Mortgage Rate Dip Could Spark House-Hunting Season

A recent Redfin report suggests that even a small drop in mortgage rates could soon kickstart house-hunting season. The median monthly mortgage payment in the U.S. fell to $2,587 in the four weeks ending August 18, its lowest level since February. While mortgage rates have steadied at just below 6.5%, some potential buyers still await further declines before entering the market. Although there has been a slight increase in home tours, this has yet to translate into more sales, with pending home sales down 5.3% year-over-year.

Despite the cautious pace, there is optimism in the housing market due to a positive economic outlook and the possibility of a Federal Reserve rate cut. Redfin agents report growing buyer interest, with some actively searching or listing their homes. New listings have increased by 3.4% year-over-year, and the recent National Association of Realtors (NAR) settlement might further encourage sellers to list their homes, anticipating lower fees.

S&P Case-Shiller Index: Home Prices Reach Record High in June

Home prices hit a new record high in June, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index, rising 5.4% from June 2023. Although this is a record, the annual gain was slightly lower than the 5.9% increase reported in May. Regional data showed that the 10-city composite rose 7.4% year-over-year, and the 20-city composite increased by 6.5%, both down from previous months.

Despite rising mortgage rates, which peaked around 7.5% in late April but have since dropped to about 6.5%, home prices have continued to climb. Lower-tier homes have seen the most significant gains, particularly in cities like New York and Atlanta, where lower-tier markets have risen significantly faster than higher-tier homes. Although prices are expected to ease somewhat with more inventory and seasonal changes, they will likely remain higher than last fall.