US new home sales surprised market expectations this week, coming in much lower than expected. US Census Bureau data shows new home sales fell significantly lower than the consensus forecast for June. At the same time, inventory also climbed to a rarely-seen level, helping to push prices lower.
US New Home Prices Have Fallen 9% Since Peaking In 2022
American new home prices are grinding lower, but holding up surprisingly well against mortgage rates. The median price fell to $417,300 in June, just off the lowest level in over a year. A down trend might be emerging, but so far the damage has been minimal—prices are only slightly lower than last year.
Since mortgage rates began climbing, prices have moved lower but not into correction territory. The median sale price in June was 9.3% lower than the peak reached in 2022, and sitting at a level similar to 2021.
US New Home Sales Surprise Lower, Down Over 7% From Last Year
New home sales fell much more sharply than the market had expected. The seasonally adjusted annual rate (SAAR) fell 0.6% to 617,000 units vs the consensus estimate of 3.4% growth over the same period. June sales were 7.4% lower than last year, the fewest since November 2023. The North-East region led the way down, with a mind-boggling drop of 63.6% over the period.
US New Home Prices Are Slipping Lower
The median sale price of a new home across the United States. In US dollars.
Source: U.S. Census Bureau; U.S. Department of Housing and Urban Development; Better Dwelling.
New Home Inventory Is Building Rapidly As Sales Soften
Weak home sales at the end of a building boom have led to much higher inventory levels. New homes for sale at month-end climbed 11.2% from last year to 476,000 units in June. That represents 9.3 months of inventory (MOI), the most since October 2022—an unusually high inventory level.
US New Home Inventory Is Rising To Unusually High Levels
Months of inventory for new homes across the United States.
Source: U.S. Census Bureau; U.S. Department of Housing and Urban Development; Better Dwelling.
MOI in a balanced market is between 4 and 6 months. Anything higher than six months is considered a buyer’s market, where prices are expected to fall. Considering inventory is 50% above the balanced threshold, the odds aren’t in favor of prices.
New home sales surprised lower as the market adjusted to higher mortgage costs and pulled forward demand. Weaker sales are also being met with more inventory—a lot more. Despite the weakened demand balance, prices have resisted any significant correction. For now, at least.
Monopoly is alive and well down south of thr 49th. Going to be interesting if any black swan event causes a US recession.
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