Sales of new U.S. homes continue to fall short of expectations, even as builders woo buyers with incentives and price cuts.
June new home sales totaled a seasonally adjusted annual rate of 627,000, meaning that many homes would change hands over the next 12 months at this pace, according to a report Thursday from the U.S. Census Bureau and the Department of Housing and Urban Development.
The rate, less than a 1% gain from May and 6.6% below June 2024, fell well short of a consensus of analysts' prediction of 650,000.
Meanwhile, the seasonally adjusted total of new houses for sale at the end of June hit 511,000, 1.2 percent above the revised May figure and the highest reading since October 2007, the report found. The median price of new houses sold in June was $401,800, down 4.9% from May and 2.9% from June 2024.
While builder perks and price reductions should buttress the market from a collapse this year, "the May and June pace of sales suggests some downside risk to our forecast for a slightly stronger pace of sales in the second half," said Nancy Vanden Houten, lead economist at research firm Oxford Economics, in a statement.
Continued sluggish sales suggest the incentives, including mortgage-rate buydowns, have had a limited effect, according to Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis at the National Association of Home Builders. In a buydown, a builder uses profits to lower the mortgage rate and make the buyer's monthly payment more affordable.
Market improvement doubtful
"Unless there is a material improvement in financing conditions or household income growth, a near-term acceleration in new home sales appears unlikely,” she said in a statement.
Homebuilders and industry analysts often cite elevated mortgage rates as a leading driver of the affordability issues vexing buyers. But Sophia Rogers of Lokation Real Estate in Orlando, Florida, told Homes.com this week that buyers are more leery of high home prices than they are of mortgage rates near 7%.
On Wednesday, the National Association of Realtors said sales of existing homes in June fell 2.7% from May to a seasonally adjusted 3.93 million. That was flat compared to a year earlier. The median price for existing single-family homes and condos reached a record high of $435,300.
Combined new and existing homes for sale now eclipse 2 million, compared to less than 500,000 in 2024, according to Lisa Sturtevant, chief economist for the Bright MLS platform.
"It is a very different housing market than it was just a year ago," she said in a statement.
Year to date, new home sales are down in all four U.S. regions, led by a 25.6% plunge across the Northeast, the NAHB noted. Sales are off 8.5% in the Midwest, 4% in the West and 1.6% in the South.
The trade group defines a new home sale as when a buyer signs a contract or a builder accepts a deposit. The home can be in any stage of construction, from not started to complete.