Sales of new single-family homes in the United States dropped by more than eight percentage points in the last month, their lowest levels in just over two years, signaling that increased mortgage rates and soaring prices are decreasing consumer demand for housing.
New home sales declined 8.1 percent to a seasonally adjusted annual rate of 590,000 units last month, below May’s revised 642,000 units, according to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, published on July 26.
Those sales figures are 17.4 percent below the June 2021 estimate of 714,000, and mark the lowest level since April 2020.
Economists polled by Reuters had forecast that new home sales, which account for a fraction of U.S. home sales, would fall to 660,000 units.
The median sales price of new houses sold in June 2022 was $402,400, according to the data, while the average sales price was $456,800.
The month-over-month decline largely occurred in the West, where new home sales fell to 112,000 from 177,000. Meanwhile, sales surged in the Midwest, from 52,000 in May to 74,000 in June.
Sales of new homes peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006, according to Reuters.
The latest data indicate that the housing market is slowing down as home prices soar and interest and mortgage rates rise, making new homes harder to purchase, particularly for first-time buyers.
Gen Z Still at Home as Rental Prices Surge
A recent survey revealed that nearly 30 percent of Americans born in the late 1990s and early 2000s still live at home with their parents or relatives due to increased rental prices.
The survey was conducted by Qualtrics on behalf of Credit Karma, and carried out from June 10 to June 15, among 1,022 U.S. adults between the ages of 18 and 25. It revealed that 29 percent of respondents who are of Gen Z age range described living at home as a long-term housing solution.
A separate survey by real estate brokerage firm Redfin found that houses across the United States are staying on the market longer due to decreased demand.
For the four-week period ended July 17, the average home was on the market for 19 days before being sold, one day more than during the year-ago period, and marking the first time in two years that the median time that a home had been on the market had increased year over year, according to Redfin.
Currently, the contract rate on a 30-year fixed-rate mortgage is averaging 5.54 percent, according to data from mortgage buyer Freddie Mac. This time last year, the 30-year fixed-rate mortgage averaged 2.78 percent.
The rising rate comes as the Federal Reserve has tightened its monetary policy in an effort to combat soaring inflation, which stood at 9.1 percent in June.
The central bank is largely expected to announce another 75 basis-point increase to its policy rate on July 27, which would bring the total interest-rate hikes since March to 225 basis points.