After a sharp decline in July, new home sales rebounded in August, according to data released Tuesday by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau.
Sales of new single-family homes in August were at a seasonally adjust annual rate of 685,000, up 28.8%, but down 0.1% compared to a year ago.
“A rebalancing of the housing market is continuing to throw the new construction market for a loop,” Nicole Bachaud, Zillow’s senior economist, said in a statement. “Homebuilders have been pulling back single-family building activity in the face of diminishing demand for months, but new home sales in August blew the July numbers out of the water, up over a quarter from where they were a month ago.”
However, the faster sales pace was not good news for inventory. At the end of the month, 461,000 new homes were still for sale, representing an 8.1 month supply at the current sales pace, down from 10.9 months in July.
As the housing market slows, homebuilders are turning to incentives and other strategies to offload inventory. But with fewer homeowners listing their existing homes, the overall housing inventory is again shrinking.
Despite the drop in supply, after hitting $466,300 in July, the median sales price of a new home came down to $436,800 in August, as homebuilders dropped prices to attract more buyers as mortgage rates spiked.
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“This surprising boost in sales could bolster builder sentiment and produce a stronger outlook for home building activity in the coming months, but with September mortgage rates skyrocketing past 6%, that seems an unlikely outcome,” Bachaud said. “While this transition period might feel like whiplash given the rapid changes from one month to the next, this market rebalancing and equalizing of power is vital to maintain long-term stability and affordability of housing in the years to come.”
Lisa Sturtevant, the chief economist for Bright MLS, said that despite the August bump, new home sales will likely be “sluggish” throughout the rest of the year. “New single-family housing construction has stalled, residential building permits are down, and homebuilder confidence has tanked as builders face growing costs, higher interest rates, and slower buyer traffic,” she said.