The number of new homes sold in a month just dropped the most in 2 years as rising mortgage rates rip into the housing market
- New-home sales slowed through June to an annual pace of 590,000 units, the US Census Bureau said.
- June's number was the lowest since April 2020.
Housing costs are still rising — and it's causing less Americans to buy homes.
US new home sales declined in June to the lowest level in two years as interest rates pushed housing affordability further out of reach for many prospective buyers.
During the month, sales of new single-family homes slowed to a seasonally adjusted annual rate of 590,000 units, the US Census Bureau said Tuesday morning. The reading reflected a 8.1% decrease from the prior month's rate.
New-home sales in May were revised to a pace of 642,000 from a preliminary rate of 696,000 units.
June's reading was the slowest sales pace since April 2020 – an unprecedented time in the US real estate market when the coronavirus pandemic curbed activity across the country.
New home sales are now down 13.4% compared to 2021. The downturn is attributed to the Federal Reserve's attempts to cool inflation by raising interest rates. So far in 2022, the Fed has raised rates twice, resulting in mortgage payments that are hundreds of dollars more expensive than they were just a year ago. As the Fed meets today and tomorrow, it's likely another rate hike is around the corner — and that could mean even more Americans will be priced out of homeownership.
"Buyers are balking due to deteriorating affordability conditions and growing sticker shock," Danushka Nanayakkara-Skillington, the assistant vice president for forecasting and analysis at the National Association of Homebuilders, told Insider.
According to census data, only 13% of new home sales in June were priced below $300,000, while just a year ago the number was 26%. During the month, the median sales price of new houses sold was $402,400, whereas average sales price was $456,800.
As homeownership became more expensive throughout the month, data from the Commerce Department shows that US housing starts, or the number of new homes that began construction, declined to a seasonally adjusted annual rate of 1.56 million units in June.
Although multifamily construction — units in buildings with five households or more — rose by 10.3%, single family construction dropped by 8.1% from May to the lowest reading since June 2020. The category saw annual construction fall to a pace of just under 1 million, well below the revised May figure.
"While the multifamily market remains strong on solid rental housing demand, the softening of single-family construction data should send a strong signal to the Federal Reserve that tighter financial conditions are producing a housing downturn," Robert Dietz, the chief economist at the National Association of Homebuilders, previously told Insider.
Data from NAHB shows rising inflation and interest rates have added as much as $14,000 to the construction costs of the average newly built single-family home. As costs weigh on builders – and homebuyers burdened by rising mortgage rates – there has also been an uptick in buyers cancelling deals on new home construction.
John Burns Real Estate Consulting reports the national cancellation rate among homebuilders reached 14.5% in June, marking the highest rate since April 2020 — signaling that more Americans are now struggling to afford home purchases.
- Survey shows people find no improvement in public toilets across country
- Sebi extends deadline for listed cos to confirm or deny market rumours
- Tom Hanks, a dental plan promotion and an AI
- New 'inverse vaccine' shows potential to treat multiple sclerosis, diabetes: Study
- TDP leaders stage hunger strike In Delhi against arrest of Chandrababu Naidu