U.S. New Home Sales Drop Amid Housing Market Shifts

Sales of new U.S. single-family homes fell less than expected in August, potentially rebounding soon due to declining mortgage rates. The Commerce Department reported higher-than-estimated sales in preceding months, with expectations for moderate growth into 2025. Regional disparities and shifting inventory levels were also noted.

Sales of new U.S. single-family homes fell less than expected in August and could regain momentum in the months ahead as declining mortgage rates and house prices stimulate demand.

The report from the Commerce Department on Wednesday also showed new home sales were higher than previously estimated in the prior three months. The Federal Reserve last week cut interest rates by 50 basis points to the 4.75%-5.00% range, the first reduction in borrowing costs since 2020. Mortgage rates have dropped to the lowest level in more than 1-1/2 years, while previously owned homes remain in short supply. Nancy Vanden Houten, lead U.S. economist at Oxford Economics, said, "We expect lower mortgage rates, pent-up demand and a still relatively scarce supply of existing homes to support modest growth in new home sales over the balance of 2024 and into 2025."

New home sales decreased 4.7% to a seasonally adjusted annual rate of 716,000 units last month, according to the Commerce Department's Census Bureau. The sales pace for July was revised higher to 751,000 units. New home sales, which account for 15.6% of U.S. home sales, are counted at the signing of a contract and can be volatile. Sales rose 9.8% on a year-on-year basis in August. Sales plunged 27.3% in the Northeast and dropped 5.8% in the Midwest, but rose 2.7% in the South.

While the median new house price decreased 4.6% to $420,600 in August, the housing market is being influenced by the dearth of previously owned homes available for sale. Higher mortgage rates and home prices had earlier pushed prospective buyers to the sidelines. Stocks on Wall Street were mixed, the dollar fell to a 14-month low against the euro, and U.S. Treasury yields rose. Yet, with the Federal Reserve's policy easing cycle underway, mortgage rates are now falling. Some economists, however, cautioned that expectations of further lower rates could keep potential buyers waiting.

(With inputs from agencies.)