New US home sales declined in July, making six months out of seven this year. The extension marks the slowest pace seen since 2016. High borrowing costs and lower demand led to the deterioration in sales in the housing market.
Government data Tuesday shows new single-family homes purchase declined 12.6% to 511,000 against 585,000 revised forecasts at an annualized rate. According to a Bloomberg survey of economists, the median estimate was 575,000.
High borrowing costs and the high price of homes are perfect examples of how the housing market is reacting, and the slump in July sales is a perfect example. Construction has slowed down, applications for a home purchase are falling, and more home buyers are backing out of the deals.
The slide in demand has led to burgeoning inventory and is expected to put pressure on home prices in the coming months. The total number of new homes available for sale at the end of July was 464,000, the highest since 2008. However, around 90% of them were under construction or yet to start.
The residential starts declined in July and were at their slowest pace since early 2021, as per data released last week. Existing home sales that make up most of the real estate market tumbled for six months in 2022. It remained at the lowest level in the last two years.
The department of Housing and Urban Development and the Census Bureau, which released the new home sales report, showed new home median price rising 8.2% to $439,400 compared to the previous year. The price appreciation was the lowest since late 2020.
Rising inventory
The homes awaiting the start of construction and the number of homes sold in July surged to 165,000. This was a five-month high and provided insight into the measure of backlogs.
At the present rate of home sales, it would take at least 10.9 months to clear the inventory backlog of new homes. This is the highest since 2009 and nearly double the numbers seen at the start of 2022.
Midwest led the decline in sales among three to four regions, falling more than 20% in the Northeast purchase of homes increased.
The new home purchase market share is about 10% of the total housing market. The numbers arrived from the contracts signed. The new home deals are considered a prompt barometer compared to purchases of previously owned properties which are calculated when contracts expire.
The report showed volatility in new home sales ranging from a 4.3% increase to a 29.5 % decline.
