A jump in new home sales

Sales of newly built homes surged in August, rising 20.5% from July to reach their highest level since January 2022, according to U.S. Census data. The jump marked the strongest one-month gain in three years, pushing sales 15.4% above the same period in 2024.

The increase came despite mortgage rates that remained elevated through August, averaging 6.63% for a 30-year fixed loan. Rates did not begin their September slide to a three-year low until after the Federal Reserve cut its lending rate. That timing has left some analysts puzzled by the size of the August spike.

Industry experts noted that government housing surveys can produce swings due to margins of error. Some private data showed a smaller increase, though the upward trend was consistent. Analysts say homebuilder incentives, including price cuts and financing assistance, likely fueled much of the demand. In September, nearly 40% of builders reported lowering prices, the highest share since the pandemic.

Even with discounts in play, the median price of a new home sold in August was $413,500, up 1.9% from a year earlier. The most substantial gains were in the South, the nation's busiest homebuilding region, and in the Northeast, where limited supply magnifies monthly changes. Sales in the West, where prices are highest, showed weaker momentum.

The burst of activity helped shrink housing inventory. Supply dropped to 7.4 months in August from nine months in July, an 18% decline. However, single-family housing starts and permits fell compared with both July and last August, suggesting builders had anticipated slower sales before the recent rebound.

With mortgage rates now fluctuating around 6.37% and expected to influence affordability into the fall, September's data may provide a clearer picture of whether August's surge reflects a lasting trend or a temporary boost from builder incentives.

Source: CNBC