Sales of newly built, single-family homes declined 13.4 percent to a seasonally adjusted annual rate of 394,000 units in July as higher mortgage rates prompted a temporary pause in buying activity, according to data from HUD and the U.S. Census Bureau.
"The drop-off in sales in July is in part a reflection of buyers' reaction to the recent uptick in mortgage rates as people reassess their budgets to determine how much house they can afford," said Rick Judson, chairman of the National Association of Home Builders
(NAHB) and a home builder from Charlotte, N.C, in a news release.
Every region recorded lower new-home sales in July, with declines of 5.7 percent, 12.9 percent, 13.4 percent, and 16.1 percent reported for the Northeast, Midwest, South, and West, respectively. Meanwhile, the inventory of new homes for sale edged up to 171,000 units in July, which is a 5.2-month supply at the current sales pace.
"New-home sales figures refer to newly signed contracts to purchase a home, rather than a completed sale, and it's likely that the higher rates caused some buyers to delay putting pen to paper," said NAHB chief economist David Crowe. "However, there is still a great deal of pent-up demand for homes in markets nationwide, and builders continue to report improving consumer interest. This suggests that what we're seeing is a temporary pause, and that buyers will return to the market once they are confident that the higher mortgage rates are here to stay."
Two industry data points affirm Crowe's assessment of strong consumer interest and demand despite the dip in new-home sales: Existing-home sales jumped 6.5 percent in July, and builder confidence in August rose three points to 59 on NAHB/Wells Fargo's Housing Market Index, which is the highest reading in nearly eight years.