Affordability challenges continued to weigh on the new-home market in June, as elevated mortgage rates, rising inflation and broader economic uncertainty kept many prospective buyers on the sidelines.

Sales of newly built single-family home rose 1.6% in June to a seasonally adjusted annual rate of 628,000, up from an upwardly revised May estimate, according to new data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales is down 5.6% from a year earlier.

“The pace of new home sales has remained constrained in recent months by elevated mortgage rates,” said Bill Owens, chairman of the National Association of Home Builders (NAHB). “Builders continue to use incentives to support sales, with NAHB survey data showing that 62% of builders offered some form of incentive in June.”

A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the June reading of 628,000 units is the number of homes that would sell if this pace continued for the next 12 months.

“New home sales are gaining some momentum at the more affordable range of the market, with homes priced below $300,000 accounting for 23% of June sales, up from 16% a year earlier,” said NAHB Chief Economist Robert Dietz. “However, that price point is generally only achievable in markets with lower development and construction costs, particularly with respect to lower state and local regulatory costs.”

New single-family home inventory in June was virtually unchanged at 485,000 units, down 0.2% from May, and down 3.2% compared to a year ago. This represents an elevated 9.3 months’ supply at the current building pace. According to NAHB, due to rising resale single-family inventory and elevated new construction inventory, combined new and existing home inventory stands at just above a 5.2 months supply—the highest level since the fall of 2014.



The median new home sale price in June fell 3.3% from May to $398,300, down 2.7% from a year ago, which the NAHB says is largely due to builder price cuts and some geographic shift in mix to the more affordable Midwest.

Regionally, year-to-date, new home sales are up 2.6% in the Midwest but fell in the other three regions, with declines of 4.7% in Northeast, 4.9% in the South and 10.1% in the West.
  
Source: eyeonhousing.org