Market Update: July 2024

The overall economy is still a bit sluggish. A recent newspaper article reported new home sales reaching a YTD low.

New home sales reach 6-month low in May

WASHINGTON – Sales of new U.S. single-family homes dropped to a six-month low in
May as a jump in mortgage rates weighed on demand, offering more evidence that the
housing market recovery was faltering. New home sales declined 11.3% to a seasonally
adjusted annual rate of 619,000 units last month, the lowest since November, the Commerce
Department’s Census Bureau said Wednesday. The sales pace for April was revised higher to
698,000 units from a previously reported 634,000 units. Economists polled by Reuters had
forecast new home sales, which account for more than 10% of U.S. home sales, edging to a
rate of 640,000 units. New home sales are counted at the signing of a contract, making them a
leading indicator of the housing market. They, however, can be volatile on a month-to-month
basis. Sales slumped 16.5% on a year-on-year basis in May. The housing market has hit a soft
patch, with the resurgence in mortgage rates also undercutting previously owned home sales
and home building. Residential investment posted double-digit growth in the first quarter. The
average rate on the popular 30-year fixed mortgage hit a six-month high of 7.22% in early
May before retreating to 7.03% by the end of the month, data from mortgage finance agency
Freddie Mac showed. Sales plunged 43.8% in the Northeast and slipped 4.5% in the West.
They plummeted 12.0% in the densely populated South and decreased 8.6% in the Midwest,
which is viewed as a more affordable region. The median new house price fell 0.9% to
$417,400 in May from a year ago. Nearly half of the new homes sold last month were priced
under $399,000. A survey from the National Association of Homebuilders last week showed
the share of builders cutting prices to bolster sales in June was the highest in five months.
Builders are constructing smaller homes to try and fit homebuyers’ budgets. National house
prices are, however, rising. The Federal Housing Finance Agency reported on Tuesday that
single-family home prices increased 6.3% year-on-year in April. There were 481,000 new
homes on the market at the end of May, up from 474,000 in April, the report showed.