New home sales in the United States bounced upward in July, as a lack of existing real estate pushes buyers into the market for new builds, government data showed Wednesday.
A lack of inventory for existing homes has boosted demand for new properties despite high mortgage rates, lifting the sector’s share of total home sales, according to analysts.
Last month, sales of new single-family houses rose to an annual rate of 714,000, the Commerce Department said.
The figure, which was higher than analysts expected, came in above June’s revised 684,000 rate.
Meanwhile, the median sales price of new houses sold last month rose to $436,700 — the highest since March.
On Tuesday, a separate report showed that sales of existing homes in the United States continued slowing in July as interest rates climb and current home owners find themselves reluctant to put their properties on the market.
The popular 30-year fixed-rate mortgage averaged nearly 7.1 percent as of August 17, the highest level in over 20 years, according to data from home loan finance company Freddie Mac.
With would-be sellers having locked in lower rates previously, analysts noted that many people cannot move without triggering a big jump in their monthly payments.
Tough to sustain?
“The bigger picture is that new home sales have risen significantly from their low last summer, and their share in total home sales has shot higher,” said a recent report by Pantheon Macroeconomics.
And the latest figures come “despite the extreme weakness in mortgage applications, which reached a fresh cycle low last week,” said Pantheon Macroeconomics economist Kieran Clancy on Wednesday.
The July sales figure was 31.5 percent higher than the same month last year, according to Commerce Department data.
Bigger developers are boosting new construction to “take advantage of” the low supply of existing homes, Clancy added, noting this is likely to further boost new home sales.
But economist Nancy Vanden Houten of Oxford Economics warned that sales of new homes would likely “come under pressure in the months ahead.”
The labor market is expected to soften as policymakers press on with efforts to cool the economy and tame inflation, and homebuying affordability is worsening with the latest mortgage rates spike, she said.