WASHINGTON—Sales of new U.S. single-family homes increased in July after three straight monthly declines, but housing market momentum is slowing as surging housing prices amid tight supply sideline potential buyers from the market.
The report from the Commerce Department on Tuesday showed builders were increasingly pre-selling homes, with about 75 percent of the houses sold last month yet to be started or under construction. The report followed in the wake of news this month that single-family building permits fell in July, while confidence among homebuilders tumbled to a 13-month low in August.
“Like we have seen in many different housing indicators, the new home sales report has shown significant cooling in the housing market recently relative to a period with robust activity late last year and early this year,” said Daniel Silver an economist at JPMorgan in New York.
New home sales rose 1.0 percent to a seasonally adjusted annual rate of 708,000 units last month. June’s sales pace was revised up to 701,000 units from the previously reported 676,000 units.
Economists polled by Reuters had forecast new home sales, which account for 10.6 percent of U.S. home sales, increasing to a rate of 700,000 units in July. Sales dropped 27.2 percent on a year-on-year basis in July.
Last month’s gain in new home sales was driven by a 1.3 percent rise in the populous South and a 14.4 percent jump in the West. Sales plunged 24.1 percent in the Northeast and decreased 20.2 percent in the Midwest. The median new house price soared 18.4 percent from a year earlier to $390,500 in July.
Sales were concentrated in the $200,000–$749,000 price range. Sales in the under-$200,000 price bracket, the sought-after segment of the market, accounted for a mere 1 percent of transactions.
Historically low mortgage rates are driving demand for housing, which was further boosted by the COVID-19 pandemic lockdowns as millions of Americans worked from home and took online classes. But supply has lagged behind, with builders constrained by soaring lumber prices as well as shortages of other building materials, household appliances, land, and labor.
Whole lumber prices have dropped sharply from May’s record highs, land and labor shortages persist.
There were 367,000 new homes on the market, up from 348,000 in June. Homes yet to be built accounted for about 28.6 percent of the supply. At July’s sales pace it would take 6.2 months to clear the supply of houses on the market, up from 6.0 months in June.
By Lucia Mutikani