As a result of rising mortgage rates and housing prices dragging down demand, the sales of new single-family homes in the United States hit a seven-month low in June, further indicating a lackluster recovery in the U.S. real estate market in the second quarter.
According to a report by Reuters, the U.S. Census Bureau, under the Department of Commerce, announced on Wednesday, July 24th, that new home sales in the U.S. fell by 0.6% last month, with the seasonally adjusted annual sales rate at 617,000 units, the lowest level since November of last year. May’s sales figure was revised upward from 619,000 units to 621,000 units.
Economists surveyed by Reuters had previously forecasted an increase in new home sales to 640,000 units in June, with new home sales accounting for over 10% of total home sales in the U.S. However, month-on-month data may fluctuate. In June, new home sales were down by 7.4% compared to the same period last year.
Despite a slight decrease from a six-month high of 7.22% in early May, the average interest rate for a 30-year fixed-rate mortgage remained relatively high for most of June.
Data from Freddie Mac, a mortgage financing agency, showed that the average interest rate for a 30-year fixed-rate mortgage dropped to a four-month low of 6.77% last week, as the market anticipated a rate cut by the Federal Reserve in September. This may help stimulate future sales.
Currently, the real estate market remains in a challenging position. Data released by the National Association of Realtors (NAR) on Tuesday indicated that existing home sales in June hit a six-month low. Last month, both the housing starts and permit construction for single-family homes also saw declines.
The impact of the Federal Reserve’s policy to raise rates to curb inflation has had the most significant effect on the real estate market. With residential investment (including home construction and sales) achieving double-digit growth in the first quarter, the real estate market had emerged from a slump.
Economists suggest that residential investment may contract in the second quarter from April to June.
In the Northeastern region, new home sales in June dropped by 7.7%, in the Midwest by 6.9%, increased by 1.4% in the Western region, and by 0.3% in the densely populated Southern region.
The median price of new homes in June decreased by 0.1% compared to the same period last year, reaching $417,300. Most homes sold last month were priced below $499,999.
The inventory of new homes increased from 472,000 units in May to 475,000 units in June. At the current sales pace in June, there is a 9.3-month supply of homes on the market, up from 9.1 months in May.