New Home Sales, Prices Plunge as Demand Craters

Sales of new single-family houses in the U.S. dropped to a two-year low in June, as potential home buyers continue to face a glut of unfavorable conditions. According to figures jointly released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, new home sales fell to a seasonally adjusted annual rate of 590,000 in June, the lowest it's been since April 2020, when the Covid-19 pandemic left markets flooded with uncertainty.

Faced with surging costs of living, high home prices and mortgage rates that are at their highest level since 2008, many prospective buyers are effectively priced out of the market, leading to faltering demand and a steep drop in sales prices. The median price of new houses sold in June dropped to $402,400, down 12 percent from a historical high of $457,000 two months earlier. The average sales price dropped even more precipitously, falling from $569,300 in April to $456,800 in June as supply of new homes far outstreches demand. According to the U.S. Census Bureau, the seasonally adjusted estimate of new homes for sales in the U.S. was 457,000, which represents 9.3 months worth of supply at the current sales rate - the highest level since 2010.

As existing home prices continued to climb in June, it'll be interesting to see if new homes become a viable alternative for price-sensitive buyers going forward. With mortgage rates at their current level and builders sitting on a lot of inventory, prices may drop even further in the coming months.